Superdrug sales and profits edge up, conditions remain challenging
Superdrug’s full-year results for 2019 have been filed at Companies House and show what it called a “solid performance” ahead of the pandemic as revenue rose 1.6% to £1.3 billion. This was driven by a mix of like-for-like sales and 30 new shops being opened in the period, although it also closed 35 locations. Pre-tax profit rose 1% to £89.4 million.
It said that its market share continued to grow last year, including its core category of cosmetics, fragrance and skincare, despite the backdrop of a tough trading environment. It also saw "sustained growth" in its online channel, helped by the launch of a 30-minute click & collect service.
But it admitted that the UK retail environment remained challenging last year, although there are clearly opportunities that Superdrug can take advantage of. This includes the growth of the online beauty market.
The company said that in 2019, the speed of technological change and the growth of value retailing, alongside weak consumer sentiment and rising labour costs all had an impact. The uncertainty posed by the delayed conclusion of Brexit also affected the market both in terms of consumer demand and the company’s wider cost base during the second half.
But those challenges were nothing compared to what it's had to face this year and the results also included an update on the start of 2020. Superdrug said it was able to keep around 70% of the shops open due to them selling essential pharmacy items. But footfall still declined by up to 75% during the lockdown, "placing significant pressure on the company’s cash flow and profitability”. That said, online sales growth helped to soften the blow.
Yet the major cost control actions that the company took have left it in a "robust" financial position, which is fortunate as it expects the UK retail environment to remain challenging for the remainder of 2020. It said that its immediate focus is a combination of preparing for the UK's departure from the EU as well as navigating the Covid-19 situation. But it said it's confident that it can “withstand the turbulence of 2020 and deliver further growth in 2021”.
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