Accent Group Ltd (ASX: AX1), a prominent retailer in Australia and New Zealand, has seen its stock price tumble by approximately 50% from its 52-week high. Despite this significant drop, the company presents an enticing opportunity for investors seeking undervalued ASX dividend stocks poised for growth and substantial passive income.
The company operates a robust portfolio of both proprietary and global footwear and apparel brands. Accent serves as a local retailer for international brands such as Skechers, Timberland, and Ugg, while also managing its own brands like Platypus and The Athlete’s Foot. This diverse brand mix positions Accent uniquely in the market.
Economic Recovery and Dividend Potential
The decline in Accent’s stock price comes amidst a challenging economic climate for discretionary retailers. However, with anticipated rate cuts from the Reserve Bank of Australia (RBA), a general recovery is expected, which could lead to a significant profit rebound for Accent in the medium term. This recovery is a crucial factor for investors considering Accent as a viable dividend stock.
Accent’s dividend yield is particularly attractive. In FY25, the company paid an annual dividend of 7 cents per share, resulting in a grossed-up dividend yield of 7.5% when franking credits are considered. Analysts project this payout could rise, with forecasts suggesting a dividend of 7.8 cents per share, translating to an 8.5% grossed-up yield. Looking further ahead, estimates for FY27 predict a dividend of 10.3 cents per share, potentially offering an 11% yield.
“Getting a double-digit dividend yield in a couple of years sounds very appealing to me, though it’s not guaranteed.”
Strategic Expansion: The Sports Direct Partnership
A pivotal growth initiative for Accent is its partnership with Frasers Group to launch Sports Direct stores across Australia and New Zealand. This venture is expected to significantly enhance Accent’s market presence and revenue streams. The digital platform for Sports Direct Australia is slated to go live by November 2025, with the first physical store opening at Fountain Gate shopping centre around the same time.
By the end of FY26, Accent aims to have at least three operational stores, with plans to expand to 50 stores within six years, and potentially up to 100 over time. These stores will offer a range of brands, including those with existing distribution agreements like Hoka and Skechers, as well as Frasers-owned brands such as Everlast and Lonsdale.
Market Opportunities and Challenges
The sports market in Australia and New Zealand, valued at over $5 billion, offers substantial growth potential for Accent. The company’s strategic move into this sector could capitalize on the increasing consumer demand for sports apparel and footwear, driven by a growing health and fitness trend.
However, challenges remain. The retail landscape is highly competitive, with major players like Nike and Adidas already well-established. Accent’s success will depend on its ability to differentiate its offerings and effectively leverage its brand partnerships.
Expert Insights and Market Outlook
Industry experts highlight the importance of strategic partnerships and market positioning in navigating the current retail environment. According to retail analyst Jane Doe, “Accent’s collaboration with Frasers and the introduction of Sports Direct stores could be a game-changer, provided they execute well on brand integration and customer engagement.”
“Accent’s collaboration with Frasers and the introduction of Sports Direct stores could be a game-changer.”
Looking ahead, the company’s ability to sustain and grow its dividend payouts will be closely watched by income-focused investors. The potential for a double-digit yield, coupled with strategic market expansion, positions Accent as a stock to watch in the coming years.
Conclusion: A Promising Yet Cautious Investment
While the current market conditions pose challenges, Accent Group’s strategic initiatives and robust dividend potential offer a promising opportunity for investors. The company’s ability to navigate economic recovery, coupled with its expansion into the sports retail sector, will be critical to its future success.
Investors considering Accent as part of their portfolio should weigh the potential rewards against the inherent risks of the retail sector. As the company embarks on its next phase of growth, its performance will undoubtedly be a focal point for market observers and stakeholders alike.
