TIDMSOS
RNS Number : 4449Q
Sosandar PLC
18 October 2023
Date: 18 October 2023
On behalf of: Sosandar plc ('Sosandar' or 'the Company')
Sosandar plc
Trading & Strategic Update
Sosandar expands omnichannel strategy, launching its first
bricks and mortar stores plus international launches in Australia
and Canada
Sosandar PLC (AIM: SOS), one of the fastest growing fashion
brands in the UK creating quality, trend-led products for women of
all ages, is pleased to provide a trading update covering the
six-month period ended 30 September 2023 and an update on the
expansion of its omnichannel strategy.
Sosandar has rapidly grown from a start-up into one of the
fastest growing fashion brands in the UK. Over the last three
years, the Company has added to its own successful online presence
by becoming a top selling brand with third party online
partnerships including M&S and Next. This was followed by the
recent launch as a flagship brand with Sainsbury's both online
(since February 2023) and in-store (since October 2023).
The Company carefully monitors consumer shopping habits and
trends on an ongoing basis. With clear evidence of consumers
increasingly shopping on the high street coupled with the growing
strength of the Sosandar brand, the Company is perfectly placed to
develop its omnichannel strategy with its own bricks and mortar
presence. This initiative, which will launch in spring 2024, has
been informed by the success of recent partnerships and will open
up 60% of the GBP55bn annual clothing market in the UK that is
transacted in physical stores. This will significantly expand the
Company's addressable market into more locations where our loyal
customers want to shop. In addition, due to strong interest from
third parties overseas, the Company is expanding its presence
internationally, and today announces that it has signed agreements
with The Iconic in Australia and The Bay in Canada to begin selling
online in Q4 of the current financial year ending 31 March 2024
("FY24").
These pivotal developments will propel the business further
towards reaching its strategic goal of becoming one of the world's
largest womenswear brands globally, in the medium-term targeting
GBP100m+ revenues and a pre-tax profit margin of at least 10%.
Investment Programme
The investment in the store opening programme will be
self-funded from the Company's existing cash resources. This
investment will include people, store execution, infrastructure as
well as supporting margin growth. As the Company moves to being an
omnichannel retailer, it is investing in moving away from price led
promotions, one of the key operating norms of pureplay retail. It
will significantly reduce price promotions in order to grow its
margin by transitioning customer behaviour to the non-promotional
led proposition it already operates successfully across all its
third-party channels.
The Company intends to operate this reduced promotional
proposition across all sales channels by the time the stores launch
in spring 2024. The aim is to begin delivering significantly higher
gross margins, putting the Company on a trajectory to deliver
pre-tax profit margins of at least 10% in the medium-term.
The Company has spent much of Q2 FY24 trialling the planned
reduction in promotional activity in order to validate its
assumptions on consumer behaviour and the associated KPIs. The
trial has validated the belief that it can create significant
longer-term profit through increased margin and average order
value. In the near term, the trial has also validated the
assumption that traffic and conversion will be lower, resulting in
a short-term revenue reduction which can be supported from existing
cash resources.
The Company expects revenue to grow by 10% year on year for FY24
to GBP46.8m and to remain in profit during the transition. It
expects revenue in the year ending 31 March 2025 ("FY25") to grow
by 17% year on year to GBP54.6m with an upward trajectory in
profitability. The Company believes this is the right strategic
course of action to deliver significantly higher gross and pre-tax
profit margins for the business and ultimately generate greater
shareholder value.
Net Cash as at September 2023 is GBP7.0m which reflects the
timing of stock purchases ahead of the Autumn season.
Autumn Trading
Autumn trading has started very well despite the unseasonably
warm weather in September. Net revenue for the week commencing
9(th) October was the highest on record (excluding black Friday)
and the highest ever for gross margin. Sales on Sosandar.com are in
line with the results of the Q2 trial, with margin and AOV
significantly increased, and orders and revenue aligned to the
Company's expectations of the new reduced promotional plan.
Sales through third party partners have also been very strong
with Next and M&S in particular having a great start to the
autumn season. The Sainsbury's brand-new fashion concept stores
have just gone live over the first two weeks of October with a wide
range of Sosandar product selling well in all of the nine stores.
In addition, the partnership with Freemans, which launched in
September, has also had a very strong start to trading with
Sosandar.
Highlights for the six months ended 30 September 2023:
Half Year Trading H1 FY24 H1 FY23 % change
====================== ========== ========= =========
Net revenue GBP22.3m GBP21.0m 6.0%
Gross margin * 55.8% 54.4% 140bps
(Loss)/profit Before (GBP1.3m) GBP0.1m -
Tax **
Sosandar.com KPIs H1 FY24 H1 FY23 % change
***
====================== ========== ========= =========
Average Order Value GBP99 GBP90 11%
Unit Value GBP46 GBP41 11.6%
Units per order 2.2 2.2 0%
Conversion 3.6% 4.5% -19.6%
Traffic 7.7m 7.8m -0.7%
Orders 276,989 347,137 -20.2%
*Gross Margin increased by 140bps year on year. This includes
the effect of an increase in the wholesale channel as a proportion
of revenue. Excluding the wholesale channel, gross margin increased
by 240bps. The trial in Q2 resulted in own site margin increasing
by 570bps year on year in the quarter.
**The pre-tax loss is driven by lower revenue following the
trialled reduction in promotional activity in Q2. The year-on-year
movement is driven by higher overheads which is primarily staff
related, with the team in place to deliver the next stage of
growth. Run-rate staff costs are at a similar level to the year
ended March FY23.
*** The trialled reduced promotions in Q2 resulted in lower
traffic and conversion, whilst the key metrics of margin and AOV
were significantly up.
The performance in the first half of the financial year has been
resilient against a backdrop of macro-economic challenges and the
strategic decision to trial reduced promotional mechanics and
activity. The Company's unique product range has continued to
resonate with its customer base with particularly strong sales of
summer occasion wear and holiday clothing. Following this success,
the Company will be launching its biggest ever occasion wear range
in time for the key trading period towards Christmas.
Trading with now well-established third-party partners, Marks
and Spencer, NEXT, The Very Group and JD Williams has been
extremely strong, with all product categories performing well.
As previously announced, a number of strategic initiatives were
launched in the half. The mobile app, which went live in July, has
exceeded expectations with c41,000 downloads to date and 20% of
sales already being generated through the app.
Store Strategy
The Company, having carefully assessed the commercial landscape,
believes that being a truly omnichannel retailer, diversifying its
routes to market and increasing brand awareness across its target
demographic, is a key next step in its growth journey. Opening its
own stores will deliver multiple benefits both to profitability and
to the brand as a whole. It will bring increased brand awareness,
higher margins, more efficient marketing and overall lower returns
rates. Over the last two years there has been ample and growing
evidence highighting the financial importance of store
locations.
By spring 2024, the Company expects to have opened its first
identified stores in the UK in affluent towns with thriving high
streets where Sosandar customers over-index. The same meticulous
planning, risk mitigation, in-depth research and successful
execution that the Company has continually demonstrated will also
be applied to the store roll out.
The Company is hiring additional store expertise to further
build on the extensive experience that it already has within its
existing teams. In addition, the Company will be investing in
technology, including EPOS systems, to ensure that the customer
journey, both online and offline, is seamless.
International
The Company recently launched with Global-e, the world's leading
platform to enable and accelerate global, direct-to-consumer,
cross-border ecommerce. The Company now transacts and fulfils
orders worldwide to over 60 countries in a cost-effective
manner.
As previously communicated, the Company has been exploring and
researching opportunities to serve an international customer base
whilst remaining conscious of managing costs and implementation
risk. The Company is delighted to announce that it has signed new
agreements with two large prestigious international third-party
partners: The Iconic in Australia and The Bay in Canada, exceeding
its previously stated target of launching with one such partner in
FY24. These consignment agreements selling a wide range of the
Sosandar collection will launch during H2 FY24.
Ali Hall and Julie Lavington, Co-CEOs commented:
"We are extremely excited about the next stage of our growth
journey. Our decision to open our own stores is the logical next
step as we look to offer our customers more ways to engage and shop
with Sosandar. We know that the added value of being able to touch
and feel our clothes will appeal to our target customers. With a
clear rollout plan in place and strict criteria around the location
of potential stores, we are confident that our stores will enable
us to accelerate our market share and increase the awareness of our
brand.
"We are also delighted to announce our first international
third-party partners. Over the last few years, we have demonstrated
how successful these types of agreements can be, and after an
extensive and thorough period of research, we believe that the
first partners we have selected are the perfect fit to launch our
international growth. We have no doubt that our unique and diverse
product range will resonate with customers globally, just as it has
done in the UK.
"Whilst we do expect to see a short-term impact as we transition
the business to offer less promotional activity, we still expect to
be in growth and remain profitable. This strategy is undoubtedly
the right course of action to deliver greater profitability and
therefore greater value to our shareholders. To be able to capture
the 60% of clothing expenditure coming from physical stores is a
massive opportunity. The Sosandar brand could not be in a stronger
position, and we have every confidence in our brilliant team to
execute successfully as they always have done.
"We believe that the future is very bright as we take the
Sosandar brand to more customers across the UK and worldwide, we
continue on our journey to become one of the largest womenswear
brands globally."
Conference call
Sosandar is hosting a Q&A call for analysts and investors
today at 8:30am to discuss the Trading Update. If you would like to
register for the call, please follow this link:
https://bit.ly/SOS_TU_webinar
Enquiries
Sosandar plc www.sosandar.com
Julie Lavington / Ali Hall, Joint CEOs c/o Alma
Steve Dilks, CFO
Singer Capital Markets
Peter Steel / Tom Salvesen / Alaina Wong +44 (0) 20 7496 3000
Alma (Financial PR) +44 (0) 20 3405 0205
Sam Modlin / Matthew Young / Rebecca Sanders-Hewett sosandar@almastrategic.com
This announcement contains inside information for the purposes
of the retained UK version of the EU Market Abuse Regulation (EU)
596/2014 ("UK MAR").
About Sosandar plc
Sosandar is one of the fastest growing women's fashion brands in
the UK targeting style conscious women who have graduated from
price-led alternatives. The Company offers this underserved
audience fashion-forward, affordable, quality clothing to make them
feel sexy, feminine, and chic. The business sells predominantly
own-label exclusive product designed in-house.
Sosandar's product range is diverse, providing its customers
with an array of choice for all occasions across all women's
fashion categories. The company sells through Sosandar.com and has
a number of brand partnerships including with Next, Marks &
Spencer and J Sainsbury.
Sosandar's strategy is to continue growing brand awareness and
expand its routes to market, reaching customers wherever they wish
to shop. This is achieved both through direct to consumer channels
and through third party partners. Sosandar offers an exceptional
product range, seamless customer experience and impactful,
lifestyle marketing, all of which is underpinned by combining
innovation with data analysis.
Sosandar was founded in 2016 and listed on AIM in 2017. More
information is available at www.sosandar-ir.com
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