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Published
Dec 8, 2022
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Seraphine battles headwinds in H1 but US market stays healthy

Published
Dec 8, 2022

British maternity-wear specialist Seraphine’s interim results have shown what the company calls its “resilience against [a] difficult economic backdrop”, although revenue fell and losses widened.


Seraphine



The company is pausing its further international rollout for now and focusing on consolidating existing markets.

For the half to the start of October, it said that “despite top-line results reflecting a highly challenging environment for the broader retail sector, our focus on profitability and strengthened skillset have driven an improvement in a number of important operational KPIs”.

Product revenue fell 9.1% to £18.9 million and was down 12.1% on a constant currency basis, “due to the highly challenging retail trading environment as noted by the retail sector as a whole”. 

That divided into an 8.8% reported fall to £16.1 million via its own digital platform “as inflation in marketing costs impacted efficiency”, and a 34.2% fall to £1.2 million via digital partnerships “as the business manages this channel with a focus on profitability”. But it also saw a 24% increase to £1.5 million via retail stores.

Product revenue in the American market grew 6.6%, but fell 2.1% currency-neutral. The EU market declined 18.8%, and the UK fell 11.7%. 

And product gross profit was down to £12.4 million from £13.6 million, although the gross profit margin rose to 65.7% from 65.6% “as we carefully balanced a higher promotional stance with price increases”. The operating loss widened to £3.8 million from £3.4 million and adjusted EBITDA was a loss of £1.5 million against a profit of £2.9 million a year ago, “due to a decline in revenue, increased marketing costs and additional overheads following our planned investment in senior personnel”.

Website traffic declined to 7.4 million from 7.7 million and the conversion rate dropped to 2.61% from 2.9%. Total orders fell to 194,000 from 226,000, although the average basket value rose to £153 from £135.

The company also said the launch of the new 'Curve' range, increased “the appeal and accessibility of our product”, while the US — its largest individual country market — “remained resilient”.

As for the start of H2, trading has been in line with management's expectations, with own digital platform sales improving to broadly flat on a constant currency basis, helped by a better-than-expected Black Friday period.

The profit contribution from digital partners is broadly in line with last year but on significantly reduced sales volumes, as a result of its plan to focus on profitability over growth in this channel.

Its retail stores continue to trade behind pre-pandemic levels and trading in the first nine weeks of H2 has been softer than H1.

CEO David Williams said: “H1 was challenging, as seen across the broader retail sector, with the combined headwinds of the macro-economic backdrop and inflation in marketing costs.

“Despite these challenges we are pleased to report improvement in some key operational KPIs, in line with our renewed focus on profitability and the actions we have taken to streamline and sharpen our internal business functions. We have achieved higher basket sizes and improved gross product margin versus the previous year, reflecting our resilient demographic and careful balancing of promotion and price increases.

“We remain focused on our strategy of bringing our innovative and stylish product to more customers worldwide and have been encouraged by the growth of our new markets. In the short term, we will pause the rollout of further international markets and focus on product innovation and improving our service proposition in existing markets. We have some exciting new products planned for the months ahead and with a niche yet loyal customer demographic, whose custom is often non-discretionary, we are confident that we are building a strong platform for the future.”

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