Oct 23, 2019
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Very is star brand at Shop Direct but Littlewoods still struggles

Oct 23, 2019

Shop Direct released good full-year results on one level on Wednesday, but not so impressive on another for the year to June 30. Its Very operation outperformed but Littlewoods struggled and the group as a whole remained loss-making. 

Shop Direct/Topshop

The online retailer said the Very app, new customers and category growth drove the performance as its Very.co.uk revenue rose a healthy 7.1% to £1.488bn. But group revenue was up a less buoyant 1.8% to £1.993bn. It underlined how the Very operation, rather than the Littlewoods brand, is the driving force at the company.

The results showed the statutory loss before tax was £185.5m (much wider than the £24.7m of a year earlier), driven by exceptional items of £310.2m, although as always with exceptional items, once they’re factored out, the figures look much better. Group EBITDA actually grew 3.3% to £271m.

The company saw strong sales growth in categories including smart tech (12.9%) and sportswear (11.8%) and a significant increase in customer satisfaction with a record Net Promoter Score (NPS). Meanwhile, clothing and footwear sales rose 2.9%.

Very increased its customer numbers by 5.7% in the year to 2.98m, boosting overall group customers by 0.7% to 4.05m and just how successful Very is can be seen from other figures too with its app orders up 22.9%, and now accounting for 29.5% of total brand orders.

So what about Littlewoods? Well, as the figures quoted earlier show, while Very as a whole did well in the latest year, the group results were less strong and Littlewoods was the cause. Its revenue decline may have been slower than previously, but at 11.3% to £505.3m, it was far from good news.

Back with the better news, the company said its group gross margin rate was broadly consistent with the prior year at 39.6% (down from 39.9% in FY18) and its improved underlying retail margin rates were driven by strong full-price performance.

It’s interesting that the company said the successful migration of Very Exclusive to Very in January, resulted in increased premium and luxury fashion sales year-on-year. The move made luxury brands such as Kenzo, Alexander McQueen and Vivienne Westwood more accessible to Very customers.

And its investment in tech seems to be having an impact with call centre contact having declined 33% year-on-year as more customers opted for digital self-serve options like Very’s AI-powered chatbot, Very Assistant.

CEO Henry Birch hailed what he called “another set of strong underlying results despite a challenging retail environment and the changing economic backdrop.”

He said Very’s ongoing climb was helped by the app, as well as by expansion in those categories cited above. 

But he added that “the economic landscape is likely to remain unpredictable in the months ahead,” although the firm is “confident that our successful and resilient business model, which offers customers the brands they love across numerous categories combined with flexible ways to pay, means we will continue to perform well.”

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