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 has a strong cash position with a balance of GBP8.3 million, allowing it to self-fund its store rollout program.
- Sosandar PLC (LSE:SOS) successfully reduced price promotions, leading to a substantial increase in profitability.
- The company is launching its first physical stores, which are expected to enhance brand visibility and have a compounding effect on online sales.
- Sosandar PLC (LSE:SOS) has established itself as a top-selling brand with major retailers like Next and Marks & Spencer, demonstrating strong demand for its products.
Negative Points
- Revenue in Q1 FY25 decreased to GBP8.2 million from GBP11.4 million due to reduced price promotions.
- The company reported a full-year loss before tax of GBP0.3 million for FY24, despite improvements in H2.
- There was a considerable delay in the store opening program, initially planned for Spring 2024.
- Sosandar PLC (LSE:SOS) ceased trading with The Bay in Canada due to technical issues with the partner's marketplace.
- The reduction in price promotions led to a decrease in conversion rates on the company's website from 4.1% to 3.4%.
Q & A Highlights
Q: What gross margin is Sosandar ultimately targeting and over what time frame?
A: Stephen Dilks, CFO, stated that Sosandar aims for a gross margin between 65% and 70% over time. This will be achieved by reducing price promotional activity and leveraging scale from store openings to buy stock cheaper. A margin of 67.5% is realistic, with potential to reach 70% in the coming years.
Q: The revenue for Q1 has dropped significantly compared to the prior year. What factors contributed to this decline?
A: Julie Lavington, Co-CEO, explained that the revenue drop was solely due to an 80% reduction in price promotions, which directly influenced the margin increase of 7 percentage points. No other material factors, such as the economy or weather, were involved.
Q: Why is Sosandar no longer trading with The Bay in Canada?
A: Julie Lavington, Co-CEO, mentioned that technical issues with The Bay's marketplace website led to a decision to stop working with them. The marketplace was not operational, and Sosandar decided to end the relationship without incurring material costs.
Q: What caused the delay in the store opening program, initially planned for Spring 2024?
A: Alison Hall, Co-CEO, stated that while Sosandar was ready to open stores, they prioritized securing the right locations. Delays were due to factors beyond their control, such as tenant issues, but they were committed to not compromising on location quality.
Q: How many stores are included in the GBP100 million revenue projection?
A: Stephen Dilks, CFO, indicated that Sosandar has identified 50 potential UK locations for stores. These locations are based on customer demographics and peer group mapping, aiming for a significant presence on UK high streets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
