Footasylum drives sales through markdowns but online and wholesale are strong
Footasylum has seen its share price plunging recently after profit warnings and updates that showed it’s suffering in the tough UK market as much as many other store businesses.
So its interim results were closely watched on Tuesday for any sign that the pressures are easing. And are they? Not really, although for the 26 weeks ended August 25 the company did report “revenue growth across all channels and major product categories, despite challenging trading conditions.” But it added that profitability was “impacted by [the] lower gross margin and by the extensive investments being made to position the company for future growth.”
In numbers, that meant revenue up 19% to £98.6 million from £83.2 million year ago, but a loss of £1.5 million on an Ebitda basis after a £4.4 million profit a year earlier. Its adjusted pre-tax loss will be £4 million (compared to profit of £2.3 million in the earlier period), although its net cash is now up to £4.5 million compared to only £0.7 million this time last year.
The retailer said it’s currently trading in line with the FY19 expectations that were rebased with the trading update early last month, which means, yes, times are still tough.
But it’s still clearly able to generate sales and cash flow, although discounting played its part.
The company also said its physical store revenue rose 12% in the half to £66.3 million but was hurt by those challenging trading conditions “and delays in store openings and upsizes.”
At least online was strong with a 29% surge to £30.2 million. This channel now makes up 31% of its total sales, up from 28% a year ago. Wholesale soared too, although from a very small base, with a rise of 200% to £2.1 million.
The company wants half of its revenue to come from online and wholesale in the longer term.
Footasylum continues to invest for growth so profits could stay crimped for some time. In the latest half it opened one new store, bringing the total to 66, and plans are well advanced to open a further five stores and upsize a total of five stores across the financial year. Four upsizes are planned before the peak Christmas trading period. However, it said that “in order to preserve the balance sheet given the lower expectations for profitability in the near term, from FY20 [it] will scale back its targeted store expansion programme to two new stores and two upsizes per annum, until the capacity for greater investment returns.”
But investments are paying off in sales at least. Its relaunched app helped to drive that healthy growth online and it’s also launched a new consumer rewards programme, called Unlckd, “to improve the consumer experience and provide greater consumer insight.”
Chairman Barry Brown admitted that “this has been a difficult trading period for Footasylum” and nobody could deny that with the results not being what investors might have liked. But he said that “we are encouraged by the early results and trends that we are seeing from our investments in key areas such as digital and marketing, and see substantial opportunity for further progress across these and other parts of our operations. In the longer-term, we remain confident that the company's differentiated, product-led, multi-channel proposition, combined with strong partnerships with core suppliers, will underpin our future progress.”
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