Trading and Strategic Update

Sosandar expands omnichannel strategy, launching its first bricks and mortar stores plus international launches in Australia and Canada

Sosandar PLC (AIM: SOS), one of the fastest growing fashion brands in the UK creating quality, trend-led products for women of all ages, is pleased to provide a trading update covering the six-month period ended 30 September 2023 and an update on the expansion of its omnichannel strategy.

Sosandar has rapidly grown from a start-up into one of the fastest growing fashion brands in the UK. Over the last three years, the Company has added to its own successful online presence by becoming a top selling brand with third party online partnerships including M&S and Next.  This was followed by the recent launch as a flagship brand with Sainsbury’s both online (since February 2023) and in-store (since October 2023). 

The Company carefully monitors consumer shopping habits and trends on an ongoing basis. With clear evidence of consumers increasingly shopping on the high street coupled with the growing strength of the Sosandar brand, the Company is perfectly placed to develop its omnichannel strategy with its own bricks and mortar presence. This initiative, which will launch in spring 2024, has been informed by the success of recent partnerships and will open up 60% of the £55bn annual clothing market in the UK that is transacted in physical stores. This will significantly expand the Company’s addressable market into more locations where our loyal customers want to shop. In addition, due to strong interest from third parties overseas, the Company is expanding its presence internationally, and today announces that it has signed agreements with The Iconic in Australia and The Bay in Canada to begin selling online in Q4 of the current financial year ending 31 March 2024 (“FY24”).

These pivotal developments will propel the business further towards reaching its strategic goal of becoming one of the world’s largest womenswear brands globally, in the medium-term targeting £100m+ revenues and a pre-tax profit margin of at least 10%.

Investment Programme

The investment in the store opening programme will be self-funded from the Company’s existing cash resources.  This investment will include people, store execution, infrastructure as well as supporting margin growth.   As the Company moves to being an omnichannel retailer, it is investing in moving away from price led promotions, one of the key operating norms of pureplay retail.  It will significantly reduce price promotions in order to grow its margin by transitioning customer behaviour to the non-promotional led proposition it already operates successfully across all its third-party channels.

The Company intends to operate this reduced promotional proposition across all sales channels by the time the stores launch in spring 2024.  The aim is to begin delivering significantly higher gross margins, putting the Company on a trajectory to deliver pre-tax profit margins of at least 10% in the medium-term.

The Company has spent much of Q2 FY24 trialling the planned reduction in promotional activity in order to validate its assumptions on consumer behaviour and the associated KPIs.  The trial has validated the belief that it can create significant longer-term profit through increased margin and average order value.  In the near term, the trial has also validated the assumption that traffic and conversion will be lower, resulting in a short-term revenue reduction which can be supported from existing cash resources.

The Company expects revenue to grow by 10% year on year for FY24 to £46.8m and to remain in profit during the transition.  It expects revenue in the year ending 31 March 2025 (“FY25”) to grow by 17% year on year to £54.6m with an upward trajectory in profitability. The Company believes this is the right strategic course of action to deliver significantly higher gross and pre-tax profit margins for the business and ultimately generate greater shareholder value.

Net Cash as at September 2023 is £7.0m which reflects the timing of stock purchases ahead of the Autumn season.   

Autumn Trading

Autumn trading has started very well despite the unseasonably warm weather in September. Net revenue for the week commencing 9^th October was the highest on record (excluding black Friday) and the highest ever for gross margin. Sales on Sosandar.com are in line with the results of the Q2 trial, with margin and AOV significantly increased, and orders and revenue aligned to the Company’s expectations of the new reduced promotional plan.

Sales through third party partners have also been very strong with Next and M&S in particular having a great start to the autumn season. The Sainsbury’s brand-new fashion concept stores have just gone live over the first two weeks of October with a wide range of Sosandar product selling well in all of the nine stores. In addition, the partnership with Freemans, which launched in September, has also had a very strong start to trading with Sosandar.