This report is an updated version of the report published on 11 December 2025 at 1:36 PM AEDT.

Step One Clothing Limited (ASX:STP) is an online direct-to-consumer brand specialising in sustainably sourced and ethically manufactured innerwear. The company offers a wide range of high-quality, organically grown, and certified underwear designed to suit various body types. With its innovative designs and customer base, STP has expanded into a multinational business, operating in Australia, the US, and the UK.

Recommendation Rationale – SELL at AUD 0.330 

• Significant Revenue Decline: STP expects 1HFY26 revenue to fall 31–37% compared to the prior period, signalling a sharp slowdown in customer demand. This contraction highlights weakening sales momentum and raises concerns about the company’s ability to sustain growth across key markets.
• Large Inventory Obsolescence Provision: The company recorded AUD 10mn inventory obsolescence provision after unsuccessful efforts to clear older, slow-moving stock. This substantial write-down reflects shortcomings in inventory management and product forecasting, directly contributing to a shift from profit to a projected EBITDA loss.
• Withdrawal of FY26 EBITDA Guidance: Due to softer sales and the one-off provision, STP has withdrawn its full-year EBITDA guidance without providing new expectations. This uncertainty signals reduced visibility over trading conditions, potentially undermining investor confidence and elevating perceived operational and financial risks.
• Technical Commentary: While undergoing a short-term rebound during a downtrend, STP’s stock price is approaching a resistance established by the low in August 2025, suggesting that the stock might resume the current downtrend soon. Price is trading below both trend-following indicators 21-day and 50-day SMAs, which might serve as dynamic resistance levels for the stock; in contrast, the stock’s previous trough may act as a support level.

STP Daily Price Chart

Considering the macroeconomic uncertainty, current trading levels, limited visibility on FY26 performance, weak sales and inventory write-down leading to expected EBITDA loss in 1HFY26 and risks associated, a ‘Sell’ recommendation is given on the stock at the current price of AUD 0.330 (as of 11 December 2025, at 12:36 PM AEDT).   

Note: This report may be updated with details around fundamental and technical analysis, price/ chart in due course, as appropriate.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 11 December 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.    

Note 4: Dividend Yield may vary as per the stock price movement.  

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.