Footasylum, a UK-based fashion retailer focusing on the branded footwear and apparel markets, announces an update on trading performance for the six months ended 25 August 2018 (the “Period”), and on guidance for the year ending 23 February 2019.
Trading
Footasylum expects to report revenue of £98.6 million for the Period, an increase of 18.5% compared to the corresponding period in the prior year (HY18: £83.2 million). Store revenue was up 12.4% to £66.3 million (HY18: £59.0 million), online revenue grew 28.5% to £30.2 million (HY18: £23.5 million), accounting for 30.6% of the total revenue (HY18: 28.2%), and wholesale revenue trebled to £2.1 million (HY18: £0.7 million).
Footasylum had 66 stores in the UK at the Period end, of which 64 were the core Footasylum fascia.
Revenue by channel for the six months to 25 August 2018
HY19 | HY18 | Revenue Growth | ||
£m | £m | £m | % | |
Total Revenue | 98.6 | 83.2 | 15.4 | 18.5 |
– Store | 66.3 | 59.0 | 7.3 | 12.4 |
– Online | 30.2 | 23.5 | 6.7 | 28.5 |
– Wholesale | 2.1 | 0.7 | 1.4 | 200.0 |
Footasylum expects to report a small adjusted EBITDA loss for the Period reflecting a lower gross margin and higher costs from investment in the Company’s operations. The Company will also report over £2 million of exceptional income (excluded from adjusted EBITDA) from the early termination of the lease on one of the Company’s Birmingham stores.
Outlook
Whilst trading since the beginning of the current financial year has been impacted by weak consumer sentiment on the high street, the Company’s store performance for May and June was positive, as reflected when the Company gave guidance for FY19 in June. However, store performance during July and August was more challenging which, in the context of there being no sign of a recovery in the short-term on the high street, has led the Board to reassess its overall expectations for the balance of FY19. While online and wholesale revenue continues to perform strongly year-on-year, store sales have been disappointing, which has been exacerbated by some unforeseen delays in the Company’s new store openings and upsizes.
Despite an ongoing programme of investment to drive sales, Footasylum’s revenue growth for FY19 is now expected to be below current market expectations. As a result of this, and a lower overall gross margin from a higher amount of clearance activity in stores, the Board now expects adjusted EBITDA for the full year to be significantly lower than previous guidance, at less than half of the FY18 adjusted EBITDA of £12.5 million.
Footasylum continues to invest in improving the Company’s consumer offering ahead of peak trading, and the Board has been encouraged by the progress made to date, including the successful delivery of several technology projects in the Period. The strategy to deliver additional store upsizes alongside new store openings is also progressing, with six new store openings and further upsizes expected to be completed by December.
The Board believes that upsizing certain stores will materially improve Footasylum’s existing strong brand relationships while enhancing the consumer experience in store. Reflecting this investment, capital expenditure and associated depreciation is expected to increase in the medium-term, with capital expenditure peaking at around £16 million in FY19. Overall the Company’s year end cash position is expected to remain in line with market expectations as a result of the exceptional income and working capital management.
In the longer-term, the Board remains confident in the strategy set out at Footasylum’s FY18 results, and is encouraged by the progress made to date in strengthening its partnerships with core suppliers and improving its technology and consumer systems.
Barry Bown, Executive Chairman of Footasylum, commented:
“These are undoubtedly challenging times in the retail industry and, in common with many other businesses, Footasylum’s trading has continued to be impacted by weak consumer sentiment. On top of that, increased clearance in stores has led to a reduction in gross margin, and we have also had some unforeseen delays in our new store openings and upsizes. However, we have continued our programme of investment, both in upsizing our stores and in our digital capabilities, and are working hard on a number of initiatives to maximise the Company’s performance during the upcoming peak trading period.
Despite the challenging outlook, we are encouraged by the continuing progress that we are making in improving our online performance, rolling out our store opening programme, and further enhancing our supplier relationships, and therefore remain confident in the Company’s long-term prospects.”
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