Sosandar PLC - Trading and COVID-19 Update
On behalf of:
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
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
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 decline1.
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.
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.
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.
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
The year to
The Company expects to report revenue for the year of at least
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
Full year results
The Company will confirm the date for its financial results for the year ended
 Source: IMRG
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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
Sosandar's founders are
More information is available at www.sosandar-ir.com
This information is provided by RNS, the news service of the
Quick facts: Sosandar
Market Cap: £31.37 m
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