Australian underwear brand Step One has reported a stark drop in sales for FY26 alongside a fall into the red at the bottom line.
In its FY26 trading update today, Step One reported a 26.7 per cent fall in sales to $63.7 million.
The company’s earnings and profits also fell, with both slipping into the red. Step One’s reported earnings before interest, tax, depreciation and amortisation (EBITDA) hit a loss of $7.4 million, with a net loss of $6.4 million. The company’s EBITDA in FY25 was a positive $17.4 million, while its profits hit $12.7 million.
On EBITDA in particular, Step One noted this would have been a profit of $1.7 million, minus an inventory obsolescence provision. Much of the bottom line plunge was driven by a reduction in discounting.
In its annual report, the company said that amid the pull-back on discounting, it became apparent that this strategy had previously masked the underlying demand for older and slower-moving inventory.
“Once these products were removed from bundles containing newer lines, demand remained limited despite significant discounting, in some cases to levels approaching carrying value,” the company reported. “This resulted in the recognition of an inventory obsolescence provision to reflect the recoverable value of those items.”
Despite the losses, Step One ended FY26 with a cash balance of $25.8 million, with no recorded debt.
Step One founder and CEO Greg Taylor said the stark numbers were driven by a decision to reduce deep discounting.
“FY26 was a challenging year, and the financial result was disappointing,” Taylor said. “Faced with subdued consumer spending across our markets, we made the deliberate decision to step back from the deep discounting that had supported sales in recent years, rebuild the brand's quality credentials, and address legacy inventory.
“We believe these were necessary steps for the long-term health of the business, but they came at a near-term cost to revenue and earnings.”
Taylor noted that this reset will lay the foundation for its ambition to become a bigger part of its customers’ wardrobe.
“During the year we broadened our product range, grew our indirect channel revenue by more than 60 per cent, and grew our customer database to more than two million for the first time, all while keeping the balance sheet strong and debt-free.”
Taylor also reported that its United Kingdom market increased its share of group revenue, supported by continued investment in localised content and indirect channels.
“We launched six new products across adjacent categories, while repeat purchase rates softened as promotional activity was reduced,” Taylor said. “These are the building blocks of a more diversified and resilient business.
“We are making progress against the reset plan, but it will take more time. We will continue to take a disciplined approach to clearing the remaining aged inventory. We enter FY27 debt-free with a customer database of more than two million, providing a strong platform from which to build.”
Following the results, Step One didn't declare a dividend. Last year, the company issued a final dividend of 2.4 cents per share.