Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sosandar PLC (LSE:SOS, Financial) achieved a significant improvement in gross margin, increasing by 670 basis points to 63.4% in Q1 FY25.
- The company reported a positive swing in profit before tax, moving from a GBP1.3 million loss in H1 FY24 to a GBP1 million profit in H2 FY24.
- Sosandar PLC (LSE:SOS) has a strong cash position with GBP8.3 million, allowing them to self-fund their store rollout program.
- The company successfully reduced inventory by GBP1.5 million, reflecting a strategic focus on full-price sales.
- Sosandar PLC (LSE:SOS) is expanding its retail presence with the imminent launch of its first stores in Chelmsford and Marlow, which are expected to enhance profitability and brand visibility.
Negative Points
- Revenue in Q1 FY25 decreased to GBP8.2 million from GBP11.4 million in the same period last year, primarily due to reduced price promotions.
- The company reported a full-year loss before tax of GBP0.3 million for FY24, despite improvements in H2.
- Sosandar PLC (LSE:SOS) experienced a delay in its store opening program, initially planned for spring 2024, due to challenges in securing the right locations.
- The partnership with The Bay in Canada was terminated due to technical issues with The Bay's marketplace, resulting in a loss of potential international sales.
- There is a risk associated with the ambitious store rollout plan, including the potential for overestimating revenue per store and managing operational costs effectively.
Q & A Highlights
Q: What gross margin are you ultimately targeting and over what time?
A: Stephen Dilks, CFO, stated that Sosandar is targeting a gross margin between 65% and 70%. This will be achieved by reducing price promotions and leveraging scale from store openings to buy stock cheaper, aiming for a realistic margin of 67.5% to potentially 70% in the coming years.
Q: The revenue for current year quarter one has dropped heavily compared to the prior year. Can you talk through the factors, was it just higher price? Or were there other factors like the economy or the weather?
A: Julie Lavington, Joint CEO, explained that the revenue drop was solely due to an 80% reduction in price promotions, which led to a 7 percentage point increase in margin. No other factors significantly influenced the revenue.
Q: Why are you no longer trading with The Bay in Canada?
A: Julie Lavington, Joint CEO, mentioned that technical issues with The Bay's marketplace website led to the decision to stop trading with them. The issues persisted for weeks, and Sosandar decided to withdraw without incurring material costs.
Q: What were the reasons for the considerable delay behind the store opening program?
A: Alison Hall, Joint CEO, stated that while they were ready to open stores in spring, finding the right locations took time. They prioritized securing prime locations over rushing the openings, which led to delays.
Q: How many stores are assumed in your GBP100 million revenue projection?
A: Stephen Dilks, CFO, indicated that 50 locations in the UK have been identified for potential store openings. These locations are based on customer demographics and peer group mapping, forming part of their long-term revenue aspirations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
