13th Dec 2022 15:01
(Alliance News) - Sosandar PLC's trading performance through October and November earned the applause of Davy Research and Edison Group, as both said Sosandar's positive trading momentum continued since swinging to a pretax profit in its recent interim results.
Davy gave Sosandar an 'Outperform' rating, after the Cheshire, England-based fashion brand said on Tuesday it delivered record sales months in October and November.
Sosandar's pretax profit in the six months that ended September 30 was GBP77,000, swinging from a loss of GBP1.1 million a year earlier. Revenue was up 72% to GBP21.0 million in the recent half-year, from GBP12.2 million a year before.
During the half-year period, the number of orders on Sosandar.com rose by 43% to 347,137 from 242,991. Of these, 80,935 orders were from new customers and 266,202 from existing customers. It also said growth was split equally between its website and third-party partners such as Marks & Spencer Group PLC, Next PLC, The John Lewis Partnership PLC and Very Group.
"Widespread industrial action and inclement weather couldn’t stop Sosandar delivering a positive analyst call, something of a rarity in UK retail," Davy commented. "Demonstrating a growing and scale addressable market, with an evolving product and marketing offer, Sosandar is growing meaningfully, not easy, as 2022 gives way to 2023."
Russell Pointon, director of consumer at Edison Group, noted it was the second consecutive six-month period of positive pretax profits, following the second half of Sosandar's financial 2022.
"Whilst larger fashion companies such as Asos and Boohoo have struggled this year in the face of difficult macroeconomic conditions, Sosandar has been able to navigate these headwinds and deliver sustainable growth throughout 2022," Pointon added, saying Edison management expected a significant improvement in profit in the second half of Sosandar's financial 2023.
Sosandar said products across all categories were selling well after the half-year period, noting that fast-tracked categories such as partywear, knitwear and outwear were performing particularly strongly.
"Looking ahead, whilst the external environment remains challenging, it is important to note that as a business, we have successfully mitigated many of the headwinds we have faced over the past two years...We continue to trade in line with market expectations for the full year and remain confident in the longer-term outlook for the business," said co-chief executive officers Ali Hall and Julie Lavington.
Net cash on September 30 was down 40% to GBP4.2 million from GBP7.0 million on March 31, which Sosandar said reflected planned earlier delivery of autumn stock than in the previous year.
This was because it wanted to facilitate deliveries to third-party partners, alongside starting to import more via sea freight, which changed its working capital cycle, realised significant cost benefit and reduced environmental impact, it said.
Davy said this move to slower, cheaper sea freight "optimises profitability but front-loads inventory build." It said this would cause inventory to fall and cash to rise, but that recent prints suggested Sosandar would "navigate its ship nimbly through uncertain waters".
"The coming recession will ask lots of different but equally challenging questions. Sosandar, while growing rapidly, appears to have navigated the challenges better than most and delivered a premium gross profit margin," Davy added.
Shares in Sosandar were up 2.2% to 22.99 pence each in London on Tuesday afternoon.
By Greg Rosenvinge, Alliance News reporter
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