Step One Clothing (STP) H1 2026 earnings summary

Executive summary

• Revenue for the first half of 2026 was $36.33 million, down 24.5% year-over-year, reflecting a strategic shift away from discounting and slower clearance of legacy inventory.

• A one-off inventory provision of $11.75 million significantly impacted profitability, resulting in a reported EBITDA loss of $10 million and a net loss after tax of $8.47 million; adjusted EBITDA was $1 million.

• Indirect revenue channels grew 75.9% year-over-year, now representing 18.3%–20% of total revenue, with strong growth in the UK and via platforms like TikTok Shop.

• New product launches in socks, pyjamas, and women's period products received positive early feedback and contributed to category growth, with women's product revenue accounting for 14.8% of total revenue.

• The business remains debt-free with $24.01 million in cash and financial assets as of December 31, 2025.

Financial highlights

• Adjusted gross margin was 73.2%, down 4.8 percentage points year-over-year; reported gross margin was 43%–43.1% due to the inventory provision.

• Advertising costs rose to 31.2% of revenue, up 2.2 percentage points year-over-year.

• Distribution and fulfilment costs increased to 20.6% of revenue, reflecting higher inventory and new 3PLs.

• Operating cash flow was an outflow of $1.4 million, compared to an inflow in the prior period.

• Dividends paid totaled $4.4 million, down 14.5% year-over-year, with a 100% payout of earnings for the period.

Outlook and guidance

• Focus remains on executing the reset plan: product innovation, brand-led customer acquisition, scaling indirect channels, and expanding internationally.

• Brand discounting will be further reduced to reinforce premium positioning.

• Dividend payments are expected to resume when retained earnings return to positive.

• No financial guidance will be issued; the company maintains financial capacity to pursue expansion opportunities.