Step One’s 1H26 Revenue Set to Plunge 31%–37%, EBITDA Loss $9M–$11M

Step One Clothing Faces Challenging First Half

Step One Clothing Limited (ASX, STP), a prominent online direct-to-consumer innerwear brand, has issued a sobering trading update for the first half of fiscal year 2026. The company anticipates a significant revenue decline of between 31% and 37% compared to the same period last year, with estimated revenue falling to between $30 million and $33 million from $48.1 million in 1H25.

This sharp downturn is compounded by an expected EBITDA loss ranging from $9 million to $11 million, a stark reversal from the $11.3 million profit reported in the prior corresponding period. A key driver of this loss is a substantial $10 million provision for inventory obsolescence, reflecting the company’s challenges in clearing older and slower-moving stock.

Inventory Woes and Market Realities

The sizeable inventory write-down signals deeper issues with Step One’s stock management and sales momentum. Despite efforts to move legacy inventory, the company was unable to avoid this material provision, which it says fully covers the obsolete stock with no further significant provisions expected at this stage. This development underscores the difficulties faced by retailers in managing supply chains and consumer demand in a competitive and evolving market.

Step One’s decision to withdraw its full-year EBITDA guidance highlights the uncertainty clouding its near-term outlook. The company cited ongoing evaluation of sales trends and inventory outcomes as reasons for withholding updated forecasts, signaling cautiousness amid volatile trading conditions, foreign exchange fluctuations, and logistical challenges.

Looking Ahead

The company plans to release its full first-half financial results on 18 February 2026, at which point investors will gain clearer insight into the extent of the turnaround required. Step One’s position as a multinational retailer operating across Australia, the US, and the UK adds complexity to its recovery efforts, especially given the direct-to-consumer model’s sensitivity to consumer sentiment and supply chain dynamics.

While Step One has built a reputation for sustainable and ethically manufactured innerwear, this update serves as a reminder of the challenges even innovative brands face in maintaining growth and profitability in a shifting retail landscape.