Underwear business Step One has managed to secure a $2.3 million lift in sales for FY25, hitting a total $86.9 million.
Despite the lift, the brand’s gross margin suffered a 4.4 percentage point drop to 76.4 per cent, likely impacted by growing promotional activity and discounting. Step One founder and CEO Greg Taylor said this was done to maintain market share in FY25 and is in line with the broader retail sector.
“Cost of living pressures and inflation continued to dampen consumer confidence and discretionary spending,” Taylor said. “In response to these challenging conditions, we made the decision to reduce marketing investment in the Australian market, ensuring a disciplined focus on profitability during a demanding period for the industry. This resulted in another solid EBITDA profit result of $17.4 million for the year.”
This EBITDA result is down 3.9 per cent year-on-year, while the underwear brand’s net profit rose slightly by 2 per cent to $12.6 million.
Step One’s advertising spend was slashed by 15.3 per cent to $23.4 million in the year, offset by double digit percentage lifts in costs across distribution and fulfilment as well as merchant and transaction fees.
“Our cash balance – while still very strong – reflects higher inventory investment, which we are now actively working to draw down through our strengthened inventory management processes,” Taylor added.
Inventory increased by $6.3 million due to product range expansion and accumulation of slower moving lines.
In a further bid to bolster revenue, Step One also focused on international markets. Taylor said the United Kingdom was a key area of focus in the second half, with that market delivering sales growth of 8.7 per cent for the year.
“We trialled a refreshed marketing approach informed by local insights and customer feedback, which resonated strongly and reinforced our brand positioning,” he said. “This positive response gives us confidence as we consider evolving our global messaging to reflect this formula and market efficiently across geographies.
“We’re also encouraged by the late-period success of our test campaigns on TikTok Shop, which is proving to be a cost-effective and scalable channel in the UK.”
Sales growth in Australia was up 7.6 per cent, with total revenue struggling to stay elevated due to United States revenue decline amid reduced spend in the country. Taylor said the plan in the US is to keep a capital light approach in the short torm. He added the country still represents a significant long-term opportunity for Step One ahead.
Speaking on discounting, Taylor said while it is an effective strategy to help maintain market share, it is not sustainable in the long term.
“We are therefore undertaking a deliberate reset: moderating discount depth, focusing on value-led product innovation, and restoring the quality values of the Step One brand,” he said.
“Our strong customer retention and product quality position Step One well to capture new opportunities as we broaden our product range, invest further in brand awareness, and work to make our offer more accessible to new customers in the year ahead.”