New fulfilment centre boosts Very Group in lockdown, but fashion sales drop
Online fashion and general merchandise shopping giant Very Group said Thursday that it has seen strong revenue growth and expects to return to profit for FY20.
Its update for the 12 months to June 30 showed annual group revenue topping £2bn for the first time with growth of 10%+. But it was Q4 that was most interesting given that it covered the period of the UK’s lockdown when consumers shifted online but also curtailed their fashion spend.
That curtailment was felt in Very’s fashion operation but didn’t seem to hurt the group as overall retail sales (including both the Very and Littlewoods brands) grew by 28%.
It saw a 65% increase in website visits “driving exceptional retail sales growth of 36%” at its star Very.co.uk brand in the final quarter of FY20. And the Very operation’s share of the UK non-food market was up by over 1ppt in the final quarter.
In that period, new customers grew by over 100% with very strong growth across both cash (+128%) and credit customers (+80%).
Fashion wasn’t exactly the most in-demand category during the quarter and the top five departments were gaming, vision, computing, garden tools/DIY and small domestic appliances. It actually saw a “significant decline” in fashion, which has relatively higher margin rates, resulting in the overall cash margin being at a similar level to prior year.
The company now expects full-year underlying EBITDA to be in the range of £255m to £270m, with management expecting that this “will deliver a positive profit before tax”. And it has a strong liquidity and cash position with year-end cash headroom of over £200m.
The group continued to trade during the lockdown and will have been helped by the fact that it opened its Skygate “state of the art” fulfilment centre on March 23, just as that lockdown began.
Its ability to carry on meant the business didn’t have to use the government's Coronavirus Jobs Retention Scheme (CRJS) and hasn’t accessed government loan schemes either.
All this positions the business well for the future with the Skygate opening set to deliver further benefits. With 850,000sq ft of automated warehousing space, it allows later cut-offs for next-day delivery, faster processing and reimbursement for returns and the potential for same-day deliveries. It also gives it the opportunity for a significant increase in scale, with automated technology enabling product to go from order to dispatch in 30 minutes. In July, Skygate processed its one-millionth outbound customer order.
CEO Henry Birch said the firm’s business model has “proved adaptable and resilient in the face of volatile conditions and changing consumer buying patterns.
“Economic conditions will continue to be challenging, but we believe we are more relevant than ever for customers, who are increasingly buying online. We are well positioned to continue the strong trading into the new financial year and will continue to invest to ensure we are at the forefront of whatever the new normal may be.”
The company will release it full results for the year in the second half of next month.
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