Shares in online women’s fashion brand Sosandar (SOS:AIM) slid 9% to 18p despite first half results which revealed strong top line growth and a substantial narrowing of EBITDA losses.
The dresses, jeans and jumpers purveyor also reported an encouraging acceleration of autumn sales, achieving a record month of sales in October and a new daily record for revenue in November, boosted by marketing initiatives reintroduced in September.
However, the shares were down after a strong recent run with investors preoccupied with bottom line losses and worried about the ongoing impact of Covid-19 restrictions on social life and therefore clothing sales.
EYE-CATCHING MOMENTUM
Results for the half to September revealed 52% revenue growth to £4.28 million and a 63% reduction in the EBITDA loss to £1.02 million as Sosandar sensibly cut back marketing spend, prioritised cash preservation and efficiently traded an already-established database whilst pausing aggressive new customer acquisition.
During the half, Sosandar saw returns reduce to 42% (from 49% in the first half of the prior year), partly reflecting the fact that shoppers have become ‘more discerning in their purchasing choices’.
The web-based apparel retailer also finished the half with net cash of £4.3 million in the coffers thanks to careful cost control.
‘We are delighted to be reporting strong revenue growth and a significant improvement in EBITDA despite one of the most challenging periods ever for the retail industry,’ enthused co-chief executives Ali Hall and Julie Lavington, highlighting the brand’s successful recent launch on the Next (NXT) and John Lewis websites.
Sosandar has delivered ‘increased sales, better cost efficiency, better engagement with customers, grown our database and quickly expanded our product range, whilst at the same time significantly reducing marketing spend’, they added.
ACCELERATING AUTUMN SALES
From September onwards, Sosandar ‘cautiously increased’ spending on acquiring new customers and ‘trading has quickly gained momentum’, said Hall and Lavington, with Sosandar now ‘exceeding the record highs seen last autumn on half the marketing spend’.
Unsurprisingly, given the continuing impact of the pandemic on consumers’ lifestyles, Sosandar is now selling a much wider range of casual and at-home product than before, though the Sosandar customer has not lost a taste for glamour, with sales of sequins, leather, fur coats and knee boots ‘remaining strong’.
ANALYST VIEW
Reacting to the results, Shore Capital analyst Greg Lawless noted ‘the confident tone from management around the ambition to deliver a long-term, sustainable success and the wider fall-out from the high street with Arcadia and Debenhams both going through administrative restructurings, suggesting a less crowded UK clothing market long term.
‘Whilst calendar year 2020 has been difficult to navigate, we believe that as a pure-play womenswear brand Sosandar has a bright future ahead of it.’
