Footasylum says it faced greater than expected promotional and clearance activity in the 18 weeks to Dec. 29 due to difficult trading conditions, prompting the British sports lifestyle retailer to issue a profit warning.
This is in line with warnings made by other U.K. retailers like Asos and Sports Direct indicating that their sales had been unexpectedly bad in November, in spite or because of the Black Friday promotions. Analysts indicated that the month of December was not much better for retailers overall.
Footasylum said the challenging trading conditions seen in the first half of its financial year, ended on Aug. 25 (see SGI Europe Vol. 29 N° 33+34 of Oct. 31, 2018), continued throughout the Christmas period. The company managed to maintain sustained growth in all channels but at the cost of its profitability resulting in a lower-than-anticipated gross margin.
The company said that it continues to expect full-year revenues to be in line with the market consensus, while the gross margin will be below the forecasts of financial analysts. It also expects to report adjusted Ebitda toward the lower end of the analysts' range of forecasts. Footasylum, whose Ebitda moved into negative territory in the first half of its fiscal year, did not provide market estimates.
During the 18-week period through Dec. 29, Footasylum enjoyed a 14 percent increase in revenues to £102.3 million (€113.0m-$130.3m), with increases of 5 percent to £63.7 million (€70.3m-$81.2m) in its physical stores and 28 percent to £36.0 million (€39.8m-$45.9m) online. Revenues from wholesale operations doubled to £2.6 million (€2.3m-$3.3m).
Retail sales benefited from five store openings and three store expansions ahead of Christmas. The company now operates 70 stores in the U.K., 68 of which are under the Footasylum banner.
In the 44 weeks to Dec. 29, the company's overall revenues grew by 16 percent to £200.8 million (€221.8m-$255.9m), with store sales up by 9 percent, online sales up by 28 percent and wholesale up by 124 percent.
Footasylum said that it will continue to focus on cash and working capital management and to remain compliant with the covenants of its £30 million (€33.1m-$38.2m) multi-currency revolving credit facility.
The company is also implementing a cost reduction plan that could result in exceptional costs in the current financial year.