Sosandar report revenue growth but warn shareholders on widened loss

Sosandar PLC (LON:SOS) have updated the market on Monday, giving a pessimistic tone to shareholders.

The firm said that its annual revenue for its financial year, which ends on March 31 is on track to beat market expectations however its loss will be wider.

Sosandar attributed this wider loss to increased customer acquisition costs, which sent shares crashing on Monday.

The firm said generated a quarterly record net revenue of £3.8 million in the three months to December 31, as net revenue exceeded £1.2 million in each month.

Looking at their recent quarter of trading, Sosandar said that revenue was ahead of management expectations and more than double the revenue generated in the same period the year before and exceeding the £2.8 million recorded in the first half of financial 2020.

Notably, the company said growth in its active customer data base which totals at 110,132 which saw a 93% surge from the same period one year ago.

Something for shareholders to also take was that the number of orders rose 140% to 84,304.

Sosandar’s customer database more than doubled since December 31, 2018, to 207,672 and repeat orders in the quarter almost trebled on the same period in 2018 to 51,320.

Ali Hall and Julie Lavington, Joint CEOs, commented:

“We are delighted to be reporting on an exceptional period of growth with sustained momentum across the key trading months to 31 December. It is pleasing that, as expected, following our increased investment in marketing, product and team we are seeing accelerated growth across all our KPIs. It is also testament to the quality of our product range that once we have acquired the customers they are becoming highly engaged with our brand.

“The opportunity we identified appears to be bigger that we first thought, with the success of new product areas helping to drive repeat purchases increasing the potential for future ranges. This has been enhanced by the successful trial in TV advertising which, combined with the already established channels of social, direct mail and PR, expands our ability to attract more new customers than originally anticipated.

“Acquisition of customers is nothing without successful retention and that’s why it is so pleasing to see that repeat customers in January, a traditionally difficult trading period, are tracking higher than in the peak Autumn/Winter period helping to continually improve the ever-growing lifetime revenue number.”

Sosandar remain confident

“Given the strong current trading, the Company’s full year revenue is on track to exceed current market expectations and the Company is confident in delivering further growth in future years thanks to the escalated customer acquisition between September and December. The success of the Autumn/Winter period and increase in repeat orders and lifetime revenues of customers means the Company intends to carry on with its increased investment strategy in Q4 to drive current and future growth. Given the upfront cost of acquiring new customers against the benefit over the lifetime of the customer, the Company expects this investment to result in the net loss for the full year being higher than previously anticipated with the increased benefit to be experienced in future years.”

November worries for Sosandar

In November, the firm reported that its interim loss widened as it invested heavily, however the firm did report that revenue grew strongly.

For the six months ended September 30, pretax loss deepened to £2.8 million from £2.0 million the year prior. This was despite revenue jumping 56% to £2.8 million from £1.8 million the year before.

Profit took a blow caused by administrative costs, which surged from £3 million a year ago to £4.3 million as reported on Wednesday.

“The investments that were made in the latter part of the second quarter have resulted in exceptional autumn trading,” Hall and Lavington added. “Post period end, October was particularly notable, as we hit a special milestone – the first month where net revenues exceeded GBP1 million, a performance which November is on course to exceed.”

Competitors in the market see mixed results

N Brown Group plc (LON:BWNG) saw their shares crash over 24% following the issuance of a profit warning last week.

Within the 18 week period, Brown saw total revenue fall by 5% to January 4. Notably, womenswear saw positive growth of 1.1% year on year, as digital revenue also grew 6.7% following growth in its Simply Be brand.

The Simply Be Brand was one of the standout performers for Brown, as revenue climbed 12% from a year ago and online revenue surged 13%.

In this department, both brands such year on year revenue growth of 0.4% and 7.9% respectively, however both brands saw overall revenue declines.

Notably, in the JD Williams brand segment total revenue slumped by 4% and Ambrose Wilson fell further by 9.6%.

Jacamo, one of the menswear brands that the firm holds saw a rise in digital revenue of 3.2%, which pushed overall revenue up by 2.5%.

Boohoo dominate the market

When looking at the womenswear market, the stand out performer across 2019 was Boohoo (LON:BOO).

The firm lifted its annual guidance this week following strong revenue growth.

Also in the update, the firm said that it had appointed former JD Sports (LON:JD) chief financial officer as its new deputy chair.

Across the four month period, which ended on December 31, the firm said that its revenue had jumped 44% to £473.7 million from the £328.2 a year ago.

Boohoo said that it expects revenue growth for its financial year, which ends on February 29 to be between 40% and 42% ahead of their previous guided range of 33% to 38%.

The firm added that t expects adjusted earnings before interest, taxes, depreciation and amortisation margin to be 10% to 10.2%, beating its previous guidance of around 10%.

Certainly, Sosandar will have to review their operations and structure in light of market competitors such as Boohoo smashing 2019, however seniority have remained confident to deliver results across the year.

Shares in Sosandar trade at 26p (-6.19%). 20/1/20 11:49BST.

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