Australian underwear brand Step One Clothing has reported a 395% growth in statutory EBITDA in the first half of FY23 on the prior period, despite a decline in customer orders and new customer acquisitions during the same time.
Its total customer orders dropped from 488,000 to 375,000 between H1 FY22 to H1 FY23, while customer acquisitions dropped from 193,000 to 136,000 in the same period. Its gross margin remains high at 80.7%, down 2.4% against the same time last year. The company also saw a decline of 100,000 in website visits from 7.1 million.
Despite this, the company recorded an increase in the Average Order Value (AOV) by 16% to over $90, resulting from both price and Average Order Quantity (AOQ) increases.
The price increases were set in place late May 2022, according to the company; however, it said improved management of discounts resulted in a better price realisation rate.
Step One said the AOQ increased with a greater focus on upsell techniques (i.e: buy one more item for a reduced price), as well as discounted mystery packs used to sell ‘stranded’ (i.e: a full range of sizes no longer available and no longer sold online) sizes and prints used during key sale events.
In the first half, Step One said it focused its advertising strategy on customer recruitment, continuing to tailor content and channel use to each market. Its advertising mix is regularly changed to maximise value.
Additional focus has recently been placed on leveraging the customer database and deploying organic content across social media, including Instagram and TikTok, according to Step One. In line with decreased customer demand, the number of website visits decreased during the period by 1.4%.
The rate of conversion decreased to 5.0%, reportedly due to a shift in advertising channels, with Step One saying this remains strong when compared to industry standards.
Step One founder and CEO Greg Taylor said the company successfully pivoted from prioritising top-line growth to a focus on profitability in response to challenging trading conditions in key markets.
“Our products continue to resonate well with our customers, reflected in an increase in average order value, and over 136,000 new customers added in the first half,” Taylor said. “We continue to maintain a strategic focus on our core offering as we explore product adjacency opportunities.
“We are mindful of our elevated inventory position, and whilst this has helped us manage global shipping delays to-date, we will maintain a prudent approach to inventory management, focusing on reducing the levels of existing inventory SKUs, while ensuring we maintain flexibility to support new product launches.”