Tomorrow morning Sosandar (LON:SOS) will be announcing its Trading Update for the six months to end-September.
I have a feeling that the statement could well indicate that the women’s clothing group is going to bounce back into profits in the year to end-March 2025.
Although its shares are trading on a heavy price-to-earnings ratio, I am not put off because there is a certain determination in its growth strategy.
The Business
Sosandar, which was founded in 2016 and listed on AIM in 2017, is one of the fastest growing women’s fashion brands in the UK targeting style-conscious women who have graduated from lower quality, price-led alternatives.
Over 1m women now have items of the company’s clothing hanging in their wardrobes, its product range is diverse, providing an array of choice for all occasions across all women’s fashion categories.
The company, which sells predominantly own-label exclusive product designed and tested in-house, states that for its underserved audience it offers fashion-forward, affordable, quality clothing to make them feel sexy, feminine, and chic.
Sosandar’s success has been built on an exceptional product range, seamless customer experience and impactful, lifestyle marketing, all of which is underpinned by combining innovation with data analysis.
The group’s growth strategy has been focused upon continuing to grow brand awareness and expand its addressable market and routes to market, reaching customers wherever they wish to shop.
The company sells through Sosandar.com and has brand partnerships in place with Marks & Spencer, The Very Group, JD Williams, J Sainsbury, The Selfridges Group, and Next.
Its Strategic Goals
Its Management is aiming to score at least a 10% pre-tax profit margin going forward.
It is aiming to more than double its turnover to £100m+ revenue as it progresses.
High on its agenda is gaining further growth through operating in scale and at greater margin.
One of its main visible growth pushes is through the opening of stores to complement its online channel.
And finally, it is focussed upon it expanding its brand.
The Stores Push
The group’s Management believes that its clients would spend more money with the group if it had more stores – giving customers the chance to touch, feel and try on product in store.
Its programme is to put together an estate of its own stores, in various locations, such as affluent market towns, some city centres, a number of shopping centres – all of which need to be situated at the right location within the town, in areas of high footfall.
Ideally, each planned store should occupy some 1,500 sq ft, be on a 5-year term lease with a 3-year break. Self-funded capex of £250,000 per unit, carrying initially some £50,000 of stock, with an expected £150,000 property cost, helping to contribute between £750,000 to £1m per annum as an average per store.
Two weeks ago, the group announced that it had signed a lease agreement for its 4th store, in Cardiff’s St David’s Centre.
That follows the recent store openings in Chelmsford, Marlow and the Metrocentre, as well as its in-store concession at Arnotts in Dublin, Ireland’s oldest and largest department store.
I believe that a number of other store opening targets are at various stages of negotiation, so it is quickly becoming visible that Sosandar is making quite a determined effort at this side of its business.
Analyst View
Matthew McEachran, at Singer Capital Markets, rates the group’s shares as a Buy, with a Price Objective of 31p.
His estimates for the current year to end-March 2025 are for fairly steady sales at £45.6m (£46.3m), but with a smart turnaround from last year’s loss of £0.3m into a £1m adjusted pre-tax profit.
That would generate 0.4p (0.2m loss) in earnings per share.
In My View
Hopefully, Budget measures permitting, women will continue to spend more money on their attire, and as they do then Sosandar, with its new stores, will stand a very good chance of increasing its sales.
Better margins will become evident in due course, which should help to bring down the pe ratios.
At the current 10.75p, I do feel that these shares, which value the company at £26.7m (which has about £8m cash in its balance sheet), are a very interesting play on the recovering retail sector.