Mixed half at Bonmarché as online soars, stores lag

Fashion retailer Bonmarché Holdings put out a patchy set of half-year results on Tuesday with bad news mixed in among the good to prove that the value/35-plus end of the market isn’t immune to the havoc being seen elsewhere in the sector.


Bonmarché

In many ways, the results fully echoed what we’re seeing in the market as a whole. For the 26 weeks to September 29, its total revenue of £97.9m was in line with the first half, but its like-for-like sales fell 1%. Store-only like-for-likes dropped as much as 4% with the overall 1% figure flattered by the fact that online sales surged 28.9%. And that means e-tail now accounts for 12% of the firm’s total take, up from 9% a year ago.

And Q2 really was a problem for the chain. The online sales growth was fairly consistent during both Q1 and Q2, but store sales were significantly worse during the second quarter, just as they were across much of the UK for its rivals.

The good-bad news mix continued on margins too. At constant exchange rates, the gross margin increased by 170bps “due to better buying and stock management.” But this was offset by currency exchange issues resulting in a gross margin of 57.2%, down from 57.8% this time last year.

And how did this all translate into earnings? Underlying pre-tax profit was only £3.3m, down from £4.2m, and statutory pre-tax profit fell even more sharply to £2.3m from £4.2m.

PERFORMANCE

As can be seen, online really was the star segment during the period and the company said its strength there was “driven by offering customers a broader range of product and more choice in sizes, and an increase in the take-up of in-store ordering.”

But its physical stores performance reflected the wider market and “stores experienced challenges,” although “almost all” remain profitable. 

On the plus side too, the company said that foreign exchange hedging contracts have been struck “at more favourable rates for FY20,” which could help margins.

CEO Helen Connolly said store trading “has been impacted by the general weaker consumer sentiment and footfall seen across the market,” but added that “we have continued to improve our proposition, particularly our digital capabilities and with a broader, modernised product offer.” She said the firm remains focused on “exploiting the opportunity afforded by” online growth, and is “encouraged by customers' responses to new ranges such as denim, leisurewear and resortwear.”

So how upbeat is she for the immediate future? "Providing that sales during the key Black Friday through to Christmas meet expectations,” the board still expects group pre-tax profit for FY19 to be £5.5m, she said, adding that “the health and fundamentals of the business remain strong” and she’s “confident in the strategy and in Bonmarché's long-term prospects.”

But the company is still facing major headwinds with “underlying consumer demand for women's clothing [having] been weak, with the impact being felt most acutely on the high street.” However, its current low percentage of sales being sourced online do give it hope for ongoing growth in that area.

Other headwinds include factors outside of its control that can make or break a season, like the weather. For instance, in the recent half it said Q1’s “generally fine, warm weather provided a boost to the retail stores, temporarily masking the weak underlying trend, with warmer weather products selling well [and] linen sales grew 40% year on year.”

However, during Q2, “and notwithstanding the good progress we have made to reduce product lead times, the warm weather meant that we began to experience stock shortages of popular summer lines.” And it seems that “sales of new seasonally appropriate transitional stock were also negatively affected by the continuation of mild weather into September.”

In numbers, that translated into a 2.7% sales rise in Q1 but a 1.1% store like-for-like fall while in Q2, sales fell 2.7% and store like-for-likes dropped a sharp 7.7%.

So what’s it doing to improve this and to buck the market trend? Its main focus is “increasing the pace of product innovation and newness” and reacting “more quickly” to trends.

The company has added third-party ranges as trials and has improved the sizing and fit of knitwear, as well as offering more variety in weights and designs. And it has introduced ‘Style Steals', featuring "on-trend items at great prices, supported by compelling displays.”

Priorities during H2 include continuing to focus on the frequent introduction of newness; a nightwear push “with a more modern proposition”; the introduction of a premium denim range, having successfully relaunched denim last year, and the relaunch of lingerie with a new and improved fit.

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