Underwear stock Step One Clothing has surged 500pc in a year, and here's why it’s just getting started

Step One Clothing’s share price is up 500pc in 12 months
The company’s unique underwear has gained a strong online following
Stockhead reached out to founder and CEO, Greg Taylor

With living costs soaring and rates sky high, Australians are increasing their expenditure on essentials such as insurance and medical costs, leaving less room to spend on discretionary purchases.

This collision between a cost of living crisis and a cost of doing business crisis has exposed many retailers, some of which are unprepared for the downturn.

But there’s one ASX-listed retailer which has seen its stock price surge by over 500% in the past 12 months – Step One Clothing (ASX:STP) – a $300m market capped online underwear retailer based out of Sydney.

Step One’s revenue increased by 25% in the last half to $45m, bucking the sluggish trend we’ve seen elsewhere in the retail sector.

“Most other retailers have struggled in the last year, but underwears are probably closer to a staple than discretionary, because you still got to wear it. It’s also because our product is so good,” says CEO and founder, Greg Taylor.

The company’s underwear is indeed one of the most unique products in the market, made out of viscose derived from organically grown bamboo. The briefs are specifically designed to offer maximum comfort and prevent sweat and chafing.

The company’s sales literature says:

“For the men specifically, your Step One boxer briefs comes with a 3D Comfort Pouch which works to lift and separate your “eggs” from your legs and keep your goods in place. Not to mention, some gents find it creates a more flattering look for their crown jewels.”

Taylor explained that when he started the company in 2017, the underwear business has not been reinvented for about half a century.

“What we had back then was like three pieces of flat cotton stuck together, and nothing new had been invented for 50 years.

“I suffered from chafing and was using creams and oils, and I thought there’s surely got to be a product out there that’s built to stop chafing,” recalled Taylor.

Finding none, Taylor then decided to make one himself, literally building the business from the ground up. Since then, Step One has sold nearly 15 million pairs of briefs.

“There were already some players in the market, but they didn’t understand that our underwear was different. It wasn’t just a pair of underwear; our technology solved chafing, sweat and riding up.”

“So we ran these ads on Facebook, and we asked people the question: ‘Do you suffer from sweat chafe and leg ride up?’

“They just worked incredibly well, turns out I wasn’t the only person that suffers from sweat chafing. The business then just grew from there,” said Taylor.

Sustainability, 5-star reviews and partnerships

The company was listed on 1 November 2021 where the share price gained over 70% on the first day of trading.

In 2022, Step One became Australia’s first clothing and garment company to achieve a FSC (Forest Stewardship Council) certification.

This certification is awarded to companies with commitments such as zero forestation, fair wage & work environments, as well as plant, and animal species protection.

“We take being ethical and sustainable so seriously here, that we started this process of being FSC certified three years ago,” explained Taylor.

“The FSC ensures there’s no deforestation or natural habitat loss in our production process.

“We’re naturally irrigated, and everything we do from knitting, dyeing the yarn, the packaging – they’re all FSC certified. And people can buy our product knowing there’s no child or forced labour.”

In January this year, the company announced one of its biggest partnerships, a deal with Surf Life Saving Australia (SLSA).

“We’ve not done a partnership prior to that, not at that scale. But these partnerships are a really good way to partner with a prestigious brand and promote our product, where they’ve got 330 clubs and 3 million members,” Taylor said.

Distribution wise, Step One currently mainly sells its items online on two platforms, its own website and Amazon. They also became available on the website of the high-end UK department store, John Lewis, about 18 months ago.

“If you look through some of the reviews, we’ve got over 60,000 five-star reviews. It’s easy to get a one-star review, but a five star review especially for men’s underwear is really hard,” said Taylor.

“And if you look on, say Trustpilot, and you sort by the most recent, we get a five-star review every couple of hours. So we sell a pair every eight seconds. That’s how big the businesses has got.”

There’s more to come

Around 87% of Step One’s sales are currently made to men, while only a small slice, 13%, to women.

Taylor believes there’s a long runway ahead for the company to make inroads into the women’s market.

“The men’s underwear market in Australia is $600 million, and women’s is $1.2 billion. And we’ve just entered the women’s market, now we’ve got a full suite of women’s products.”

“What that’s done is increase our total addressable market from $600 million to $1.8 billion.”

“What we also found interesting was that half of men’s underwear was actually bought by women, so we’ve still got such a long way to go in even in our men’s product,” said Taylor.

At the moment, the company is only selling in three markets – Australia, UK, and a small operation in the US.

“We’ll probably look at some other markets, potentially in the Asian region. It could be India, but we’re looking at a couple of different options.

“There’s so much growth to come, and there is no reason why everyone in the world shouldn’t be wearing this product. It’s that good,” said Taylor.

Step One Clothing share price today:

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