Bonmarché struggles in Q4 but latest year's profits target is achieved
There's been plenty of bad news coming out of UK retail this week so it's about time we had some good news. Did Bonmarché Holdings’ trading update on Friday qualify? Well, on the surface, the update for the year to March 31 looked like it might. The company said it’s “pleased to confirm that, reflecting the good progress achieved during the financial year, FY18 profit before tax will be in line with the board's expectations.”
It added that online sales “maintained the strong growth seen throughout the financial year against comparatives that became more difficult in the fourth quarter.”
But here’s the bad bit… the store sales performance “was disappointing, reflecting the issues more widely reported in the clothing market.”
It wasn't all grim - the retailer may have seen total sales declining “slightly”, but the gross margin percentage was “resilient” for the full year. However, Q4 really did look tough (more of that later).
Yet Bonmarché stayed upbeat and said its lower headline gross margin across the year had been anticipated due to adverse foreign currency movements, but “was largely mitigated through tight stock control and improvements to the loyalty scheme, which led to lower discounting."
There were also “significant overhead cost savings, delivered through improved operational efficiency and reduced, but more effective, marketing expenditure.”
It also said that its financial position remains sound, which is an important point to make in the current environment that has seen so many big names racing to cut costs in order to stay afloat.
So let's look at some actual figures. For the full year, comparable store sales fell 4.5%, online-only sales rose a stunning 34.5%, and online and store combined comp sales were down 1.5%. Total sales dropped 0.5%.
Now for Q4. The performance deteriorated sharply and in the 13 weeks to March 31, comp sales fell 11.1% in its stores, although online sales still managed a 31.2% increase. With stores and online combined, comp sales fell 7.4%, while total sales were down 6.2%.
The company may have made a point of talking about the quarter’s tough comparisons with the prior year, but total sales only rose 5.2% in the previous Q4. So it’s clear that Bonmarché’s fall this time was greater than the gain it made a year ago. It’s clear too that it suffered form many of the same issues as others in UK fashion retail did in January, February and March, although we don’t know if there were any issues specific to the company also affecting the figures.
What did CEO Helen Connolly think of all this? "As anticipated, trading conditions in the final quarter of our financial year remained challenging and, against this backdrop, I am pleased that we have delivered an increase in the FY18 profit before tax compared to last year,” she said.
"While we expect the market to remain difficult, our focus will be on continuing to improve our proposition to customers through a number of self-help initiatives, which we expect to drive further progress for the business during the new financial year.
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