Highlights

  • Step One Clothing (ASX:STP) reported FY26 Revenue of A$63.7 million, down 26.7% year on year.
  • Adjusted gross Margin remained at 75.9%, broadly consistent with FY25 after excluding inventory provision impacts.
  • The company reported A$25.8 million in cash and financial Assets with no debt.
  • Step One’s customer database exceeded two million customers during FY26.

Step One Clothing (ASX:STP) reported FY26 results following a year focused on resetting its Business model, reducing legacy inventory and reducing reliance on discounting. The company experienced lower revenue and reported losses, while maintaining margins excluding inventory impacts and strengthening its customer base.

What happened

Step One released its FY26 financial results for the year ended 30 June 2026, highlighting the impact of subdued consumer demand, reduced discounting and inventory management activities.

Revenue declined to A$63.7 million from A$86.9 million in FY25, representing a 26.7% decrease.

The company stated that the decline reflected weaker consumer spending across its markets and a deliberate reduction in deep discounting as part of its business reset programme.

Reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) was a loss of A$7.4 million compared with EBITDA of A$17.4 million profit in FY25.

After excluding the inventory obsolescence provision, adjusted EBITDA was A$1.7 million.

Reported net loss after tax was A$6.4 million, compared with net profit after tax of A$12.7 million in FY25. Adjusted net profit after tax was A$0.8 million.

Founder and Chief Executive Greg Taylor said the company focused on rebuilding Brand positioning, reducing aged inventory and broadening product offerings during FY26.

The company launched six new products across adjacent categories, increased indirect channel revenue by more than 60% and expanded its customer database beyond two million.

The numbers investors need to know

The key financial focus for Step One is the difference between reported performance and underlying operating performance.

Revenue declined 26.7% to A$63.7 million during FY26, while reported gross margin reduced to 61.6% from 76.4% due to inventory-related impacts.

Adjusted gross margin was 75.9%, broadly consistent with FY25’s 76.4%, indicating underlying product margins remained stable after removing the inventory provision impact.

Reported EBITDA declined to a loss of A$7.4 million, while adjusted EBITDA was A$1.7 million.

Reported net profit after tax moved to a loss of A$6.4 million, while adjusted net profit after tax was A$0.8 million.

The company maintained a strong Balance Sheet with cash and financial assets of A$25.8 million and no debt.

Step One did not declare a Dividend for FY26. The company stated that dividends are expected to recommence once Retained Earnings return to a positive balance, subject to financial position and trading conditions.

Business outlook and key considerations

Step One’s FY27 focus is on completing the business reset, clearing remaining aged inventory and rebuilding revenue growth without relying heavily on discounting.

The company aims to increase customer engagement through broader product offerings, localised content, indirect channels and expansion across Australia, the United States and the United Kingdom.

Key areas to monitor include revenue stabilisation, repeat purchase trends, inventory clearance progress, customer Acquisition efficiency and margin sustainability.

Bull case

Step One has maintained underlying gross margins despite a challenging trading environment, with adjusted gross margin of 75.9% remaining broadly consistent with the prior year.

The company enters FY27 with A$25.8 million in cash and no debt, providing financial flexibility while executing its reset programme.

The customer database exceeding two million provides a larger base for future Marketing and repeat purchase opportunities.

Growth in indirect channel revenue of more than 60% and expansion into adjacent product categories provide additional avenues for revenue recovery.

Bear case and risks

The main challenge remains revenue recovery, with FY26 sales declining significantly as the company reduced promotional activity.

Repeat purchase rates softened during the year as discounting was reduced, highlighting the difficulty of rebuilding customer purchasing behaviour without promotional support.

The company continues managing aged inventory, and a prolonged recovery period could pressure cash generation despite the debt-free balance sheet.

Additional risks include competitive pressure in online apparel, customer acquisition costs, changing consumer spending patterns and execution risk around the reset strategy.

What comes next

The key focus areas for FY27 include completion of inventory clearance, improvement in revenue trends and restoration of sustainable earnings growth.

Investors will monitor customer database growth, repeat purchase rates, indirect channel performance, product expansion and potential reinstatement of dividends when retained earnings conditions are met.

Conclusion

Step One Clothing (ASX:STP) entered FY27 after a challenging FY26 marked by lower revenue, inventory adjustments and a shift away from heavy discounting.

The company has maintained underlying margins, strengthened its balance sheet and expanded its customer base while implementing a broader reset strategy. The next phase will depend on whether these changes translate into renewed revenue growth and improved profitability.