Sosander: ditching the discount powers profits as customers return

When I write a Stock Pitch, I usually choose companies where I’m already reasonably bullish. This week I’ve flipped that around to choose a stock where the StockRanks are bullish, but I’m less sure.

Women’s fashion brand Sosandar (LON:SOS) may be a fine business with exciting potential. But its record since listing is mixed and as a marginally-profitable startup, it falls outside my personal investing universe.

For this week’s Stock Pitch I’ve decided to venture outside my comfort zone and take a closer look at Sosander, which is one of the latest StockRank Jumpers highlighted by Ed’s exciting new research.

Sosander’s share price has also doubled over the last year as investors have backed the founders’ revised strategy, perhaps suggesting that there really is new momentum in the business:

What’s more, July’s StockRank Jump has left the shares with strong Quality and Momentum scores. That could be a nice setup for further growth:

• Share price at the time of publication: 12p

• Market cap: £26m

Disclosure: at the time of publication, Roland has no position in SOS.

The Pitch

Sosander was founded in 2015 by former fashion journalists Julie Lavington and Ali Hall, who run the company as co-CEOs. Launched as an online-only business, it’s a mid-priced fashion brand targeting “underserved 35-65 year old women”.

Source: Sosander FY26 presentation

Sosander listed on AIM in November 2017 through a reverse takeover. The business initially reported rapid sales growth and improving profitability:

However, progress was put on hold in 2024 when the company decided to open some physical stores and move away from regular discounting towards a full price strategy.

The result of these decisions has been two years of sales below previous highs. However, I believe the benefits of this approach are starting to show. If recent momentum can be maintained, this business could be well on the way to becoming a larger and more profitable retailer than it’s been previously.

In the sections below, I’ll explain why this strategy could work and offer some thoughts on valuation.

The Big Picture

Sosander’s recent FY26 full-year results suggest to me that its full-price strategy is working. Margins improved and sales momentum looks solid:

• FY26 revenue +14% to £42.3m, with adjusted pre-tax profit doubling to £0.4m. Q1 FY27 sales rose by 22%, helped by a weak comparative last year. Full year expectations were unchanged.

• Active website customers rose by 15% to 205k in FY26, with improved order frequency and conversion rate. Sosander is starting to reverse the 30% decline in active customers it suffered after the switch to full price sales in FY25. This suggests to me that the company's target customers have accepted this new pricing strategy.

• Most customers are repeat shoppers: 75% of its sales are to repeat customers, who shop an average of four times per year. Marketing spend to acquire new customers is now paid back on the first order.

• Rising gross margin signals opportunity: for consumer goods, a high gross margin is often a sign of a brand with pricing power. Sosander’s gross margin rose to a very respectable 64% last year, putting it at a similar level to Dr Martens (66%) and Burberry (68%). If Sosander can maintain this performance, continued sales growth could drive a rapid improvement in operating profit as revenue outpaces costs.

Source: Sosander FY26 presentation

Going Deeper

Drilling down further highlights a number of other factors that could support profit growth and which do – perhaps – add credibility to the investment case:

• Physical stores: it’s easy to scoff at Sosander’s decision to open physical stores. These shops may yet prove to be a white elephant. But founders Hall and Lavington make the point that 60% of the c.£60bn clothing market in the UK is still transacted in stores. They believe Sosander’s shops will help to build brand awareness, support customer loyalty and drive more traffic to the company’s website. In fairness, this is consistent with the strategy used by many other mid-market and premium brands.

• Third-party sales growth: Sosander also sells through a number of third parties, including Next, Marks & Spencer and John Lewis. These now account for c.50% of sales – up from zero five years ago. This provides a capital-light way to expand, including internationally.

• M&S tailwind: according to the latest note from Singer Capital Markets, last year’s M&S cyber attack translated into c.£0.7m of lost profit for Sosander. Sales have now returned to normal, so I assume the profit contribution from M&S should recover. Sosander’s adjusted pre-tax profit is expected to rise by £0.7m to £1.1m in FY27. I would guess that some of this should already be underpinned by normalised M&S sales.

• Positive cash generation: I am always more favourably disposed to companies generating positive free cash flow. That’s true here. My sums estimate underlying free cash flow of 0.6p per share last year, or around £1.2m. That’s comfortably ahead of Sosander’s FY26 adjusted net profit of £0.7m and gives the stock a free cash flow yield of c.5% – reasonable value.

• Ownership: each of the two co-founders has a c.2.4% holding, while serial entrepreneur Nigel Wray owns 11.5%. Schroders is the largest shareholder at just over 20%, providing solid institutional backing. Collectively, I think the major shareholders are likely to be aligned on creating a more valuable business, even if some patience is required.

What The Brokers Say

Broker consensus estimates on Stockopedia present a mixed picture:

Checking individual forecasts from Zeus Capital and Singer Capital Markets on Research Tree confirms this consensus estimate remains valid – both brokers have a FY27 adjusted EPS estimate of 0.4p.

There are no FY28 forecasts available yet.

Zeus has a fair value estimate of 16p, while Singer’s target price (pending an update) was 11p on 14 July. Averaging these gives a figure of 13.5p, about 12% above the recent share price of 12p.

The Bear Case

Building a successful fashion brand is a tough challenge. I can see a number of risks here that could limit future share price growth:

• Retail store risk: store sales only rose by 13% on a like-for-like basis last year, compared to a 24% increase in website sales. To make matters worse, Sosander’s stores are still losing money. The company says that the stores placed a £0.9m drag on pre-tax profit last year. Despite being in their second year of operation, management say the shops are still “maturing”. I’m not sure how long it’s expected to take for them to become profitable. They may not do.

• Lack of fundamental momentum? Sosander’s share price has almost doubled from its March 2026 lows, but as we’ve seen above there hasn’t been a corresponding increase in broker forecasts. This lack of fundamental momentum is a risk – as we’ve seen elsewhere recently, fast-rising share prices can quickly reverse if momentum isn’t supported by rising expectations.

• Fully-priced already? As things stand, Sosander trades on a FY27E P/E of 29. That’s not cheap unless sales and profits continue to rise, ideally at 10%+ per year. With no forecasts for FY28, earnings visibility is limited.

• It’s a tough market: the track record of small fashion brands building durable growth businesses in the UK is mixed. Many enjoy a short period of success before fading. Maintaining volume growth without a return to discounting will require strong brand-building and consistently good product.

• Trustpilot: Sosander has nearly 2,500 reviews with an average 4.6-star rating. That’s pretty good, but I was struck by a small but meaningful minority of reviews complaining about product quality issues. If that’s a representative sample then it could be at odds with the company’s brand positioning.

The Bottom Line

Sosander has established a clear niche and benefits from founder-led clarity and strong distribution through major retailers, as well as direct channels.

There’s growing evidence the company’s full-price sales strategy has been accepted by shoppers: the number of active customers rose by 15% last year and 75% of website buyers are repeat customers.

Implementation of this strategy has improved the economics of the business. The group’s gross margin rose by 1.9% to 64% last year, a level that’s close to other respected mid/up-market brands.

Risks remain, of course. Sosander’s foray into physical retail stores is still loss-making and could remain so. This year’s forecast sales growth of 11% is adequate rather than inspiring and there are no forecasts for FY28 yet.

If sales growth or margins falter, the current valuation could lack support. But if the company’s recent trajectory can be maintained, I think there’s a good case to argue that Sosander could become a larger and more valuable business.