REG - Sosandar PLC - Trading & Strategic Update

SosandarAnnouncement

18/10/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231018:nRSR4449Qa&default-theme=true

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 £55bn 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 £100m+ 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 £46.8m
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 £54.6m 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 £7.0m 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                  £22.3m    £21.0m   6.0%
 Gross margin *               55.8%     54.4%     140bps
 (Loss)/profit Before Tax **  (£1.3m)   £0.1m    -

 Sosandar.com KPIs ***        H1 FY24   H1 FY23  % change
 Average Order Value          £99       £90      11%
 Unit Value                   £46       £41      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
(https://bit.ly/SOS_TU_webinar)

 

Enquiries

 Sosandar plc                                         www.sosandar.com (http://www.sosandar.com)
 Julie Lavington / Ali Hall, Joint CEOs               c/o Alma
 Steve Dilks, CFO

                                                      +44 (0) 20 7496 3000

 Singer Capital Markets

 Peter Steel / Tom Salvesen / Alaina Wong

 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 (http://www.sosandar-ir.com/)

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDEAPEXFAFDFFA