Trading Update

Focus on sustained profitability and transitioning to a true multi-channel retailer

The Company is delighted that it has successfully opened its first three physical stores in the UK, as it continues to further expand its multiple routes to market. The period under review, once again, reflects the prioritisation of margin enhancement and profitability with substantial positive swings in both.

Highlights

• Revenue of £16.2m (H1 FY24: £22.2m) as the Group continued to transition away from price promotional activity outside the major scheduled sale events
• Strong gross margin of 62.2%, versus 55.4% in the previous year, reflecting margin enhancement prioritisation
• £0.6m substantial positive swing to £0.7m pre-tax loss from £1.3m pre-tax loss in H1 FY24 as a result of margin enhancement and continued careful cost management
• Robust net cash of£7m, reflecting timing of inbound stock for the Autumn/Winter collection and capital expenditure for Sosandar’s roll-out of own stores (£8.3m at 31 March 2024)
• Successfully opened Sosandar’s first three own stores, with strong trading in all three, coupled with a demonstrable uplift in traffic to the website in the areas where the stores are located
• Trading in October across all channels has started strongly, with revenue being ahead of last year which represents a substantial positive swing compared with H1. It is evident that the strategy to focus on margin is paying off as customers become used to paying full price on Sosandar.com
• FY25 revenue expectations moderated to£40m; pre-tax profit expectations unchanged given continuing margin strength, evolution of customer engagement strategy and careful management of other overheads
• The Board reiterates its confidence in Sosandar’s longer-term growth trajectory

A highlight of the period has been the Company’s transition towards becoming a true multichannel retailer with the opening of its own stores, currently in Marlow, Chelmsford, and the Metrocentre in Gateshead, and soon to open inSt David’s centre, Cardiff. These locations were carefully selected for being affluent, thriving locations where Sosandar customers over-index. The Group’s multi-channel model enables it to capture part of the £60bn per annum clothing market transacted in physical stores in the UK and will accelerate profitable growth. We are pleased with the progress of our store portfolio thus far, with sales tracking in line with our expectations, plus increased traffic to the website in the areas where the stores are located. It remains our expectation that the store roll out programme will be funded entirely from our existing financial resources.

Sosandar continues to benefit from its strong third-party partnerships, including Next and Marks & Spencer in the UK. Our partnership with The Iconic inAustralia has also started well. The Company launched in store with Arnotts in Dublin, Ireland, in September, after initially selling online through Arnotts’ website. Sosandar has seen strong demand from customers in Ireland via its own website. Being in store with Arnotts, the oldest and largest department store in Ireland, is also helping to cement the brand’s presence in the country.

Sosandar’s success with third party partners and its ability to roll out its own stores reflects our strong brand presence and unique products that resonate not just with women in the UK but increasingly internationally. We are committed to maintaining the quality of our design and growing our brand presence, and we continue to review opportunities to leverage our brand equity and create additional growth avenues.

Current Trading and Outlook

Trading in October has started well across all channels, with revenue being ahead of last year which represents a substantial positive swing compared with H1, and a continuation of a strong gross margin as we head towards our seasonal peak. Due to our continued prioritisation of profitability at this stage of the Company’s development, we are moderating our FY25 revenue expectation to £40m. Our FY25 profit expectations are, however, unchanged in light of the continued strength and upward trajectory of our gross margin, selective use of marketing, significant reduction in price promotional activity and careful management of other overheads.

We continue to focus on margin enhancement as we begin to drive sustainable profitable growth. Our medium-term strategic goal is to deliver a pre-tax profit of at least £10m (as derived from our previously disclosed objectives of a pre-tax profit margin of at least 10% and £100m+ revenues). The Board reiterates its confidence in Sosandar’s prospects, both for the remainder of FY25 and in the longer-term growth opportunity.

Ali Hall and Julie Lavington, Co-CEOs commented: “The opening of our first three own stores marks a key point in the Company’s development, as we move towards becoming a true multichannel retailer. We are incredibly proud of seeing the Sosandar brand on thriving high streets and are delighted with the reception we have received so far. The feedback on our product range and store environment from both new and existing customers has been fantastic, which shows the power of the Sosandar brand. We have hit the ground running with strong footfall and conversion, and have also seen a demonstrable uplift in traffic to our website in the areas where our stores are located.

We remain committed to delivering in line with our growth strategy, focusing on margin enhancement to improve profitability, and we are already seeing the results of this in our performance. This has continued into October and we remain excited for what lies ahead for Sosandar.”

*Sosandar believes that, prior to publication of this announcement, market expectations for the year ending 31 March 2025 are currently revenue of £45.6 million and pre-tax profits of £1.0 million.

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