Accent Group Ltd (ASX: AX1) shares could be destined to generate big returns for investors.
That's the view of analysts at Bell Potter, which are tipping the ASX 300 stock as a buy.
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What is the broker saying about this ASX 300 stock?
Bell Potter notes that the leisure footwear retailer released a trading update at its annual general meeting last week.
The ASX 300 stock reported group sales growth of 6.8% for the first 20 weeks of FY 2025. This is ahead of Bell Potter's expectations for a 6.2% increase. Though, this positive was offset by a 70 basis points decline in gross margin, which was ahead of the broker's expectation for a 10 basis points contraction.
Other details of note include:
The new 1H25 new store target of 50 was a beat to BPe while the Frasers Group (FRAS) executive on board another strategic positive for the partnership with the global player in their potential regional expansion in Australia.
In response to the above, Bell Potter has trimmed its earnings estimates slightly. It said:
We make no changes to our average sales per store (LFL) assumptions and note the relatively more challenging comps through the Nov-Dec period (-2% in Jul-Oct vs +1.8% in Nov-Dec during FY24). However, our FY25e GP margins now see a 30bps decline (vs prev. flat), ahead of the current run-rate (70bps decline) given that we expect a progressive recovery through 2Q. We assume a narrower gap in gross margins vs pcp given a broadly similar promo participation intensity vs 2Q24. Our revised CODB assumptions see a ~30bps improvement in FY25 driving EBIT margins of ~9% for FY25. The net result sees our NPAT forecasts -1.7%/-1.2%/-1.3% for FY25/26/27e
Time to buy
In light of this, Bell Potter has retained its buy rating on the ASX 300 stock with a new price target of $2.75 (from $2.80).
Based on its current share price of $2.29, this implies potential upside of 20% for investors over the next 12 months.
The broker is also expecting a 6% dividend yield in FY 2025, boosting the total potential return to 26%.
Commenting on its buy recommendation, Bell Potter said:
We continue to view AX1 as a key pick in our retail sector coverage given their scale as Australia's market leader, growth adjacencies in both footwear/apparel from exclusive partnerships & TAF channel conversion and growing vertical brand strategy led by Nude Lucy. We also view the strategic investment by FRAS in AX1 (~15%) and the board appointment today as a step forward to unlocking the sizable store roll-out opportunity of FRAS's core Sports Direct banner in Australia.
