TIDMSOS
RNS Number : 3216P
Sosandar PLC
09 June 2020
Date: 9 June 2020
On behalf of: Sosandar plc ('Sosandar' or 'the Company')
Embargoed until: 0700hrs
Sosandar plc
Trading and COVID-19 Update
Delivering revenue growth and cost savings in an unprecedented
environment
Sosandar is pleased to announce a trading update for its
financial year ended 31 March 2020. Alongside this, at this time of
unparalleled uncertainty, the Company also provides an update on
how it has been operating since the outbreak of COVID-19, the
impact on current trading and the actions taken by management to
ensure that it is well placed to deliver on its longer-term growth
ambitions.
COVID-19 Update
Current trading
Despite all the challenges, the Company is pleased to report
that it has responded well to a period of significant disruption
and uncertainty. As an online-only business, it has been able to
react quickly, maintain service throughout and deliver continued
revenue growth in first two months of the current financial year (1
April to 31 May). This is despite a significant reduction in
marketing expenditure and demonstrates the benefit of having a
larger customer database as a result of previous customer
acquisition expenditure:
-- Order growth of 44% year on year
-- Revenue increase of 62% year on year
-- New customer acquisition up 15% year on year
-- Reduction in marketing expenditure of 69% year on year
-- Returns down to c.33%
-- Improvement in unit economics, with positive order
contributions for the first time in April and May
-- Year on year bottom line improvement with c.55% reduction in loss
-- Agreements reached with John Lewis and Next to go live on
their online platforms in Autumn/Winter 2020
-- Addition of Klarna to the website, providing an extended payment option for customers
These results have been achieved against an industry backdrop
where the online clothing market was down 24% in April and
indications are that May also saw a year on year decline (1) .
Underpinning these results, we have seen a shift to more casual
ranges as customers seek out comfort with fewer social occasions
calling for more formal product types. As a result, the business
quickly changed new-in products to meet these changing needs and
has had a number of loungewear items, denim and casual summer
dresses which have sold out in days and quickly repeated, as well
as benefiting from customer waitlists which ensure quick sell
through.
These product types naturally have lower sell out prices, which
has led to lower average unit values and therefore lower basket
values. However, this movement in average order value has been more
than offset by the naturally lower levels of returns of these less
fitted product types, helping to reduce overall returns rates to
c.33% in April and May.
Browsing behaviour has increased, with traffic up 98% year on
year. The nature of this search activity has meant lower levels of
conversion as customers are either browsing as a pastime or making
more considered purchase decisions. However, the business has still
seen spikes in conversion following marketing emails and new in
product notifications, showing continued engagement with the
brand.
In the initial period of lockdown, like much of the industry,
the business experienced a dip in demand and so promotions and
discounts were utilised to stimulate purchases. This impacted
margin in the early weeks of April, but the business has been able
to successfully shift customers back to full price purchases with
margin quickly returning to normal.
Financial position
Cash at 31 March 2020, was GBP5.2m, which had reduced to GBP4.4m
at the end of April as the creditor position from committed spend
in March unwound. Cash at the end of May remained flat at GBP4.4m,
representing the actions taken to maximise efficiencies especially
around stock and discretionary spend, reflecting the speed at which
the business is able to adapt to change. The Company believes it is
sustainable to continue successfully running the business with this
significantly reduced cash burn level. It remains cautious in its
approach to discretional spend, carefully monitoring KPIs and cash
management whilst adapting product plans to meet the changing needs
of the consumer.
Given this and the strength of its balance sheet, the Company is
confident that its existing finances are sufficiently resilient to
withstand the current crisis and means it is well placed to resume
investment in growth at the appropriate time.
Management action
As a result of the drastically different trading environment,
the Board has taken a number of actions to manage short-term costs,
while ensuring the business remains on a strong footing to deliver
on its longer-term growth ambitions. These include:
-- A substantial reduction in its planned marketing spend in the short to medium term, in order to focus on repeat
orders from the Group's existing customer base, rather than new customer acquisition.
-- Stock levels being carefully managed with new stock being procured in line with demand. Sosandar's flexible
supply base has enabled the Group to adapt production plans very quickly to changes in consumer demand with
continued use of the test and repeat strategy and minimal initial order quantities helping to reduce stock risk.
-- Warehousing and fulfilment costs successfully flexed to the changing demand needs as the Company continues to
benefit from the expertise of Clipper Logistics.
-- All discretionary expenditure frozen.
-- Approximately 60% of the workforce has been furloughed.
-- Reductions made to PLC Board remuneration.
Operational Update
The Company's priority continues to be the health, safety and
well-being of our team, partners and customers. The transition to
working from home has been successful with minimal disruption and
the team is working effectively to serve our customers.
Warehousing and distribution operations have seen no disruption
with the Company's partner, Clipper Logistics, following national
government advice in terms of remaining operational whilst adhering
to the guidelines set out to protecting the welfare of distribution
staff.
The Company sees its suppliers as partners and have been working
with them to manage the way through what has been a difficult
period. The Company has had to cancel orders, postpone intake and
obtain discounts but this has been done in a collaborative manner
to make sure that its supply chain is protected for the future.
Sosandar would like to thank them all for their support over the
recent months.
Trading update for year ended 31 March 2020
The year to 31 March 2020 reflects a period of trading largely
prior to the disruption caused by COVID-19 and show there is a
clear demand for the Company's unique offering in the market.
The Company expects to report revenue for the year of at least
GBP9m which is over 100% revenue growth year on year. The Company's
customer base continues to be very engaged with the brand, with
repeat orders up 144% and its active customer base up 111%.
Supported by its marketing spend, the period saw continued growth
in customer numbers with new customers up 67% and orders up 109%.
Returns remained flat at 50%.
This growth in new customers was driven by the Group's strategic
decision to invest and focus marketing spend in TV advertising
throughout Q2 and Q3. TV advertising naturally has a slower
conversion rate in comparison to social media and brochures, which
resulted in the Group's conversion rate decreasing by 25bps.
Average order value for the period was down 6%, reflecting better
than expected winter weather and the impact this had on product
mix.
Following the Company's announcement on 18 March 2020,
management has taken significant further actions to ensure the
business is protected against the impact of the pandemic. These
actions include an expected increased and prudent stock provision
with the full year results due to uncertainties of the continued
impact of COVID-19, increased levels of discount used in the
initial period of lock-down to help stimulate demand and one-off
costs relating to measures required to adjust working conditions.
The discounting used during the initial period of lock-down and
stock provision, alongside the planned first order discounting
following the period of intense customer acquisition in Q2 &
Q3, is expected to result in the Company reporting a gross margin
decrease of 555bps. The Company also saw higher than anticipated
returns on sales immediately prior to the announcement of the lock
down. As a result, the Company now expects to report a loss for the
year which is slightly higher than anticipated in its announcement
on 18 March 2020.
Full year results
The Company will confirm the date for its financial results for
the year ended 31 March 2020 in due course.
[1] Source: IMRG
Enquiries
Sosandar plc www.sosandar.com
Julie Lavington / Ali Hall, Joint c/o Alma PR
CEOs
Shore Capital
Patrick Castle / Mark Percy / James
Thomas +44 (0) 20 7408 4090
Alma PR Limited (Financial PR) +44 (0) 20 3405 0205
Rebecca Sanders-Hewett / Susie Hudson sosandar@almapr.co.uk
/ Sam Modlin
About Sosandar PLC
Sosandar is an online womenswear brand, specifically targeted at
a generation of women who have graduated from throwaway fashion and
are looking for quality, affordable clothing with a premium,
trend-led aesthetic. This is a section of the market that is
currently being underserved.
Sosandar was launched in September 2016. The Sosandar business
model is built around using trend-led, exclusive designs produced
in-house and then manufactured using a variety of global suppliers.
Sosandar caters for a growing market of fashion-conscious women,
while utilising an outsourced logistics provider that can support
its planned growth over the coming years.
Sosandar's founders are Ali Hall and Julie Lavington, who
previously launched and ran high street fashion magazine Look, as
editor and publishing director respectively. They have a combined
experience of over 35 years in the fashion industry, including in
the design, manufacture and sale of fashion ranges for some of the
UK's high street retailers, including Debenhams, Office, Oasis and
JD Williams.
More information is available at www.sosandar-ir.com
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END
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