Koovs results show continuing losses but steady improvement
London-listed online retailer Koovs reported its preliminary full-year results on Tuesday and they certainly made interesting reading given the intense pressure that the company has been under for some time.
But it said that its recent funding round has put it “back on track to accelerate growth” and it seems generally upbeat about the future, despite some figures in the report that didn't make happy reading.
CEO Mary Turner summed it up, saying: “Last year was marked by concerns over funding and we managed our cash position prudently by reducing our marketing expenditure, which inevitably impacted sales. However, we now have the necessary capital to put Koovs back on track, deliver on our strategy and accelerate our sustainable growth plan.”
She also said that even with the cut in marketing spend last year, the brand continue to grow its awareness and “maintained our leadership position for customer experience and engagement, becoming one of Asia's most trusted brands.”
But all that confidence couldn't disguise the fact that the latest fiscal year (the 12 months to the end of March) wasn't exactly anything to boast about.
The company's biggest market is India and it delivers its figures in both sterling and rupees. It said its revenue fell by 29% to INR543 million/£6.4 million. And its gross order value was down 21% to INR1.259 billion/£14.8 million following the reduction in marketing spend as the firm focused on trying to not run out of cash.
However, it also said that the quality of sales improved with its trading margin up by 163% to INR114m/£1.3m and the trading margin percentage increased by 1,000bps to 14%, reflecting a focus on reducing markdowns and driving high-value sales.
That all resulted in a pre-tax loss, but one that was 22% smaller than the prior year at INR1.312 billion/£15.3 million. Clearly, a situation in which the loss exceeds revenue isn't a great one, but the company seems to think it's on the right path.
And it has some justification for that. It managed to secure the additional £22.1 million funding that it needed to go forward in recent months. And one of its investors, Future Lifestyle Fashions Ltd, gave it a vote of confidence with a plan to increase its stake to 29.9% (under London listing rules, a 30% stake would force a full takeover bid.)
And on Tuesday it also said that its brand awareness has increased to 21% from 15% in the last year. Meanwhile its social media base has surged, generating three times the level of engagement on Facebook compared to Koovs' nearest competitor.
It has also won a number of awards and other accolades with the highest customer Net Promoter Score among online fashion retailers in India (Redseer, January 2018), as well as topping the Forrester ranking for Best customer experience in online retailers.
But of course, high consumer awareness and adequate funding aren't enough if the market itself is weak and the Indian market certainly has been troubled in recent periods. During Koovs’ FY18, the retail market was recovering from the impact of earlier demonetisation and adapting to the introduction of GST, the new national sales tax introduced in July 2017, with many e-tailers discounting deeply to clear legacy stocks.
But the company avoided the heavy discounting resorted to by many of its peers and said that it’s in better shape now as a result, as its improved margins testify.
And there’s no denying that a market where only 1% of retail spend is currently online has plenty of potential for future growth. Compare that to the UK, where the figure is 17%, while 16% of Chinese sales are online and 8% of those in the US. And Koovs also has reason to be confident given that 22% of e-tail spend in India is for clothing.
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