Step Up Step One

Step Up Step One

9 Apr, 2024 | Stock Insight


Predicting style and fashion trends is as challenging as forecasting Melbourne’s weather or expertly timing the market. While style shifts rapidly, materials evolve more slowly. However, when a material proves cost-effective, appealing, comfortable, and accessible, it quickly becomes integral to fashion. Bamboo has emerged as such a material.

Innovators have spun its fibres into yarn as fine as silk, creating clothing that combines elegance and durability. Bamboo clothing, known for its lightness and breathability, captivated fashion enthusiasts worldwide. Its hypoallergenic and antibacterial properties offer a gentle touch while keeping wearers fresh. In the sustainable evolution of the clothing industry, bamboo has become a key player, transforming a combined approach to fashion and sustainability.




Step One Clothing (ASX: STP) has embraced this vision. Established as a leading direct-to-consumer online retailer for innerwear, Step One offers an exclusive range of high-quality, organically grown and certified, sustainable, and ethically manufactured innerwear that suits a broad range of body types.

Founded in 2017 by Greg Taylor, Step One swiftly broadened its horizons by introducing a comprehensive women’s underwear range, embracing inclusivity and sustainability. Step One has quickly grown into a multinational company operating in Australia, the US, and the UK, boasting a market capitalisation of around $300 million since its listing on the ASX in November 2021. The share price has had an incredible 12 months rising by over 500% at the time of writing.


Having developed a cult-like following, Step One has moved to expand from its Australian origins.

The company has broadened its distribution channels beyond Direct To Customers (DTC) by partnering with Amazon, leveraging the e-commerce giant’s platform to reach a wider customer base and establish a new revenue stream. Revenue from Amazon accounted for over 6% of Step One’s total revenue in the first half of 2024. Step One has also deepened its presence in the UK market through a partnership with John Lewis, a renowned retail giant known for its quality products and strong customer service. This collaboration, initiated with a pilot launch in December 2023, aims to tap into John Lewis’s large member database and aligns with Step One’s values. Closer to home, Step One has ventured into brand partnerships, exemplified by its collaboration with Surf Life Saving Australia (SLSA). Through this partnership, Step One aims to attract new customers from SLSA’s membership base while supporting SLSA’s mission by contributing $5 per pair sold, strengthening its community ties and expanding its market reach.

Leading from the Front

Taylor, the founder and CEO of Step One, has a substantial vested interest in the company’s success, holding 124,272,996 shares, or 67.05% of the company. This level of ownership exemplifies our enthusiasm for leadership with “skin in the game,” as their incentives align closely with the company’s performance. Taylor is supported by David Gallop, an Independent Non-Executive Chairperson with a diverse background in sports administration, media rights, and regulatory frameworks, adding depth to the company’s leadership.

Recent Results and Outlook

In the first half of 2024, Step One Clothing achieved impressive financial results.

Step One’s revenue reached $45 million increasing 25% on the prior corresponding period (PCP) with over 1,540,000 global customers and 182,000 new customers added in the first half of 2024 supporting strong demand for its product. The company boasts an envious gross margin normally reserved for software business of 81% highlighting the company’s competitive advantage . The increased revenue and strong margin flowed through to the bottom line with earnings per share growing by 36% to 3.79 cents per share. A strong profitability performance is backed up by the company’s solid balance sheet with closing cash at the end of December 2023 of $43.9 million and no debt. With a touch under $15 million generated from operating cash flows Step One managed to pay an interim dividend of 4 cents per share, more than 100% of its profit for the half!

In the near term, Step One anticipates sustained growth in Australia, the UK, and the US while maintaining profitability. Key strategies include bolstering the women’s line, forging partnerships, broadening sales channels in the US, investing in innovation, and enhancing the customer experience. The company remains confident in its ability to execute these strategies effectively, aiming to capitalise on opportunities in each market and solidify its position as a leader in sustainable and ethical underwear.

The TAMIM Takeaway

Driven by a passionate founder and with a loyal clientele Step One is a business we feel can be an attractive company to follow going forward.

Should it repeat its first half result of 3.79 cents per share in the second half at a current market price of $1.64 it trades on an earnings multiple of 21.6. While not cheap, for a growing company it presents an attractive opportunity although pressure remains to maintain strong earnings performance. Just keep the following in mind: a pair of Step Ones now sell every 8 seconds in Australia, the UK and the US.

As it embarks on international expansion and continues its impressive profit trajectory, coupled with a steadfast commitment to sustainable fashion and strategic growth endeavours, Step One presents an enticing investment opportunity within the dynamic realm of ethical apparel.

Disclaimer:  Step One Clothing (ASX: STP) is currently held in TAMIM Portfolios.

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