Highlights

  • FY26 revenue was A$63.7 million, with the company reporting a 26.7% decline.
  • Statutory FY26 EBITDA was a A$7.4 million loss, including an inventory provision.
  • Adjusted FY26 EBITDA was positive at A$1.7 million, using a non-IFRS measure.
  • Indirect channels contributed 18.2% of FY26 revenue, following 62.3% growth.
  • The company is pursuing new products, selective channels and tighter discounting.

Step One Clothing Limited (ASX:STP) sells underwear and related clothing through its online stores and selected indirect retail channels in Australia and international markets. Its product positioning centres on comfort, fit and bamboo-viscose garments. In FY26, the company pursued changes to pricing, inventory management, marketing and distribution after lower sales and changes in customer demand affected its financial performance.

Revenue Decline Reflects Retail Reset

Step One Clothing Limited (ASX:STP) reported FY26 revenue of A$63.7 million, down 26.7% from the previous corresponding period. The company attributed lower sales to reduced promotional discounting and softer consumer demand. Australian revenue was A$35.0 million, while the United Kingdom contributed A$26.2 million and the United States A$2.5 million.

Management is balancing brand positioning with the need to retain customers and generate sales without relying excessively on discount campaigns. In its FY26 presentation, Step One also described new product introductions and plans to broaden the range into related apparel categories. These initiatives remain subject to customer demand and commercial execution.

Inventory Charges and Earnings

The company reported a FY26 statutory EBITDA loss of A$7.4 million and a net loss after tax of A$6.4 million. A A$9.1 million increase in its inventory obsolescence provision reduced reported gross profit. Excluding the provision movement, adjusted EBITDA was A$1.7 million and adjusted gross margin was 75.9%. These adjusted measures are not defined under IFRS.

For Step One Clothing Limited (ASX:STP), the charge highlights inventory exposure when product demand, assortment or pricing changes. The company identified older stock requiring additional markdowns and reported an increase in inventory held before the provision. Stock selection and forecasting therefore remain important considerations during the commercial reset.

Indirect Channels and Product Development

Indirect sales accounted for 18.2% of FY26 revenue after increasing 62.3% over the corresponding period. These channels include selected marketplaces and retail partners and complement the company’s direct online business. Step One Clothing Limited (ASX:STP) intends to expand selectively through aligned partners while protecting margins and brand presentation.

The company reported six new products released during FY26. Its stated strategy is to develop adjacent product categories and, where customer demand supports it, expand beyond its existing fabric offerings. Product launches can broaden the customer proposition but also require inventory investment, marketing support and careful assessment of sell-through.

Advertising Costs and Customer Acquisition

Advertising and marketing expenses totalled A$21.1 million in FY26, representing 33.1% of revenue. Although the dollar expenditure fell, its share of revenue increased because sales declined more sharply. Step One Clothing Limited (ASX:STP) indicated that brand advertising will remain part of the reset programme, alongside customer re-engagement and efficiency measures.

Repeat purchasing, order conversion and advertising effectiveness remain important indicators for the direct-to-consumer business.

Cash Position and Outlook

At 30 June 2026, Step One Clothing Limited (ASX:STP) held A$25.8 million in cash and financial assets and reported no debt. Net cash from operating activities was an outflow of A$2.7 million for FY26. Management indicated that its business remains capital-light, but inventory purchasing, fulfilment and advertising still require working capital.

The company said it would continue releasing products, improving brand advertising and reducing discounting. No financial guidance was issued. It also stated that dividend declarations are expected to recommence once retained earnings return to a positive balance. Retail demand, stock clearance and delivery costs remain potential constraints.

Key Insights

Step One Clothing Limited (ASX:STP) is shifting its attention towards product range development, indirect distribution and advertising effectiveness as it works through its FY26 earnings and inventory pressures. Future disclosures on revenue, gross margin, inventory provisions and cash flow will indicate how the reset is progressing.