Fashion and footwear conglomerate Accent Group (ASX:AX1) has admitted that its targets for key staff to earn performance rights were “overly ambitious”, and is preparing to lower them at its upcoming AGM.
This comes amid recent market challenges faced by the group – which manages or owns the likes of Platypus Shoes, Hoka, Hype DC and Sports Direct in Australia and New Zealand.
According to a statement to the ASX, Accent is planning to vary the performance condition attached to the Tranche 8 performance rights on issue, comprising 3,788,205 rights and excluding the rights held by CEO and managing director, Daniel Agostinelli.
These rights are valued at just under $5 million, based on AX1’s current share price of $1.31.
Proposed changes include lowering the FY24 statutory diluted earnings per share target from 10.55 to 10.12 in FY25, and dropping the FY27 target from 19.29 to 12.25. Accent is also planning to slash the annual compounding EPS growth target rate from 22.3 per cent to 10 per cent.
This also includes a reduced sliding scale across threshold, target and stretch to match.
The ASX has since granted a waiver for Accent Group to pursue this change, subject to shareholder approval.
Accent reasoned with shareholders, reporting significant business challenges post-COVID, including several years of high inflation, high interest rates, lower USD/AUD exchange rates and subdued discretionary spending.
“Those challenges have impacted Accent’s earnings,” the group explained. “The EPS performance condition attaching to Accent’s 5,471,635 Tranche 6 performance rights was not met, resulting in those performance rights lapsing.
“It has also become clear that the modified EPS performance condition for Accent’s 4,597,619 Tranche 7 performance rights is unlikely to be met, and accordingly, none of those rights are expected to vest and instead those performance rights are also expected to lapse.”
Accent added that the Tranche 8 performance rights noted above have also been set at an unrealistic level, which is similar to Tranche 6 and 7 rights.
“The board does not expect that the EPS performance condition for the Tranche 8 performance rights will be satisfied, and as such, is concerned that those performance rights no longer serve to incentivise performance or retain employees.”
Given also the “volatile” profit results of Accent Group in FY24 and FY25, which the board sees as representing the new baseline for Accent in the current market, the board thinks the targets to score its bonuses need to be modified.
“Accordingly, in order to ensure that staff retention is not compromised by events that were beyond the reasonable control of Accent’s employees, the board is proposing to exercise its discretion to vary the EPS performance condition attaching to the Tranche 8 performance rights held by participants (excluding the Tranche 8 performance rights held by Accent’s CEO and managing director, Daniel Agostinelli).”
Shareholders will vote on the proposal on November 21 at Accent Group’s AGM.