Step One Clothing has disclosed it had found that it has been over-claiming GST credits in respect of an overseas-based advertising supplier. To rectify this issue, it needs to make an adjustment to prior and current year marketing expenses, Morgans notes.

The prospectus FY22 earnings forecast was nonetheless unchanged. That said, the company revealed UK sales grew by only 3% in the first half -- disappointing for a business in te its second full year, the broker suggests, albeit due to logistical hold-ups.

Fearing Step One will not outperform guidance as assumed, the market trashed the stock by -35%, back to the issue price. Morgans does not think the story is "broken" nor longer term growth prospects diminished. Add retained, target falls to $2.70 from $3.20.

Sector: Commercial Services & Supplies.

Target price is $2.70.Current Price is $1.53. Difference: $1.17 - (brackets indicate current price is over target). If STP meets the Morgans target it will return approximately 43% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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