Footasylum warns of tough year ahead

The UK´s fashion retailer warned Tuesday 2019 could be a tough year and that it might resource to heavy discounting to cope with the challenging trading environment. The company will report full-year results on May, 21.

The shows and clothing chain closed the year in good fashion, reporting 14 percent revenue growth on for the 18 weeks to December, 30. Online sales were up 28 percent to 36 million pounds from 28.1 million pounds now accounting for 33 percent of total revenue. Meanwhile, stores-generated revenue increased 5 percent to 63.7 million pounds. Wholesale revenue doubled to 2.6 million pounds.

Yet the challenging trading conditions reported in the first half of its financial year have continued throughout the key Christmas trading period. As a result, Footasylum recognised that they still have doubts on future trading conditions; pointing out that UK economic uncertainty and weakening consumer sentiment have led to "some of the most difficult trading conditions seen in recent years".

Footasylum Plc, which sells online and in stores across the UK, said on Tuesday it had had to cut prices after disappointing Christmas trading. On the back of the news, shares in the retailer plunged 28 percent to a record low, reported Reuters.

“The challenging trading conditions reported in the first half have continued throughout the Christmas trading period,” Footasylum said in a corporate release.

"Against this market backdrop, promotional activity and discounting across the retail sector were higher than anticipated, with the result that Footasylum's levels of promotional and clearance activity were greater than expected during the period. Consequently, while the company has sustained its revenue growth across all channels, gross margin has been lower than previously expected for the period," Footaslyum explained in their financial update. Now, the company expects annual gross margins to be lower than consensus expectations and earnings before interest, taxes, depreciation and amortisation to come in "towards the lower end of the current range of analyst forecasts".

“While the cuts today are disappointing we would hope that we have passed the nadir of bad news,” Liberum analysts said in a note.

Per Reuters’ data, Footasylum Plc.’s stock has lost 86 percent of its value since the company floated on London’s small-cap market (AIM) in November 2017.

Footasylum said it was planning a wider initiative to cut costs but the plan could also entail some expenses in the short term.

Still, the company said that Footasylum and other retailers had had to discount much more heavily than anticipated.

Photo: Footasylum Facebook