Sosandar results were good, but not good enough

Take nothing away from Sosandar; their growth story has been remarkable.

In 2019, the fashion group generated £4.4m. According to Sosandar’s full-year trading statement released yesterday, 2024 FY’s revenue will be £46.3m.

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The brand is obviously popular, and they have come a long way very quickly, but sales growth is slowing. Most importantly, despite huge revenue increases, the group struggles to turn a profit. 

As the saying goes, ‘revenue is vanity, profit is sanity’.

There was a slight miss on 2023’s top line and a marginal miss on the bottom line, but it means the group will record a net loss for the year. Nobody would have blinked an eye at the monetary value of the miss had it not meant a full-year loss just a year after recording its first profit. 

A loss for 2024FY was clearly a big disappointment for investors and shares fell 10% yesterday. The company said profitability had improved post-period but stopped short of quantifying the claim.

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Sosandar’s valuation has been hard to justify, and the full-year trading statement makes it even harder.

Gross margins are strong at 57.6%, yet the operations supporting top-line growth are too cumbersome to generate a profit.

As we’ve seen with Superdry and ASOS, fashion retailing is a brutal business. Sosandar investors will be concerned that the group’s target of £100m revenue and 10% margin may not come soon enough, if at all. 

Revenue growth fell to 9% in 2023, a substantial slowdown from 2023. £100m revenue will take a long time to reach at that pace. 

The cash position of £8.3m is reasonable but not strong. At the current run rate, there is very little room for manoeuvre. Significant changes to the business model are required to improve efficiency and justify the share price. 

Sosandar shares are down 53% over the past year – it’s difficult to argue against the decline.

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