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Bonmarché issues another profit warning, March trading is tough

Published
today Mar 19, 2019
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Bonmarché Holdings issued another profit warning on Tuesday (its third in recent times) with any good news in its trading update being balanced by bad news too. It was clear that the company still faces massive challenges with trading far from satisfactory at present. And it’s also clear that the past few months have seen unusual trading patterns.


Bonmarché


The company reiterated its statement of December 13, saying that sales during its earlier Q3 had been below its initial expectations and that meant its priority during the clearance sale period in the first two months of this year was to sell off its residual autumn/winter stock. 

It said that the sale “was successful, and autumn/winter season stock levels are now 40% lower than at this time last year,” although there was a sting in the tail as “it was necessary to discount heavily in order to achieve this.”

And the good news/bad news continued. The company said that March trading has been poor. That must be a huge disappointment as sales since Christmas “had been slightly above” what was needed to meet its revised guidance, for underlying profit before tax (PBT) for the year to be within the lower end of the “break-even to £4 million loss range of underlying PBT outcomes set out in December's announcement.”

"Trading since the beginning of March has been significantly weaker, reversing sales gains made in the previous months," it said. "In light of this, we now believe there is a likelihood of sales levels for the remainder of the month continuing to follow this trend, which would make the underlying PBT loss for the year greater than £4 million.”

How much greater? Quite a lot it seems and its estimate is currently for a loss of between £5 million and £6 million.

The company said that it believes “the recent downturn in trading is a consequence of the demand for transitional ranges, between winter and spring, having been satisfied during January and February. Although sales of spring season stock benefitted from the spell of warm weather in late February, this is not yet a large enough part of the sales mix to compensate for the lower demand for transitional stock.” It added that “nevertheless, on the basis of this positive early reaction to the spring product, our expectation for FY20 remains unchanged,” although given its run of three profit warnings, it’s unclear how much we can rely on that expectation.

And it leaves us asking plenty of questions about what will happen in the future. From this announcement, it feels like Bonmarché’s customers have a limit as to how much fashion they’ll buy, regardless of the weather. And if they buy a lot more of it in one month, then at some point, their purses will snap shut, however compelling the in-store offer.

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