Step One Clothing has reported an annual loss amid a double-digit decline in sales as the innerwear retailer faced subdued consumer demand in the last fiscal year.

The company swung to a net loss after tax of $6.4 million in the 12 months ended June 30, compared to a profit of $12.7 million in the prior year. Its revenue dipped 26.7 per cent to $63.7 million.

Founder and CEO Greg Taylor said the results were disappointing following what has been a challenging year.

“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 said.

On the positive side, the company’s customer database has exceeded two million for the first time. Its balance sheet remained healthy with cash and financial assets of $25.8 million and no debt.

“Setting the inventory provision aside, our margins held firm, with an adjusted gross margin of 75.9 per cent, broadly in line with last year and strong by industry standards.

“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,” Taylor added.