Even as shoppers return to stores and get back on their shopping sprees, value apparel retailer Best and Less (ASX: BLG) is struggling to attract customers. In H1 FY23, the Company delivered an unaudited total revenue of $324.8 million, a 13% increase on H1 FY22. However, its EBITDA was down 28.2% to $22.1 million.
Best and Less’s like-for-like (LFL) sales were down 4.9%, with store LFL sales down 0.9% and online sales down 29.8%.
Most stores relied on Black Friday, Christmas and Boxing Day periods to boost sales. Best and Less also benefitted from the period, recording a like-for-like sales growth of 5% in December and core non-discretionary product lines across the important baby category performed well. However, this momentum wasn’t enough to offset the impact of a delayed summer and supply chain issues that Best and Less faced.
In the first three weeks of January, LFL sales were up 13.7%, as store sales increased 18.6% and online sales fell 23.1%.
A lower gross profit margin percentage (47.1%) and “softer-than-expected” sales in H1 led to the Company’s net profit after tax (NPAT) declining by about $6 million, reducing from $20.1 million in H1 FY22 to $13.7 million now.
Surprisingly, even though consumers have returned to physical stores, Best and Less is not seeing enough foot traffic or demand. The Company took action—not sure what exactly—to reduce the risk of losing inventory and strengthen price perception. Excluding this, the average sale price (ASP) for H1 was 9.5% higher than the previous corresponding period.
At the end of the first half, the total stock on hand was 8.9% higher than H1 FY22, amounting to $104 million. But, there are 5% fewer units due to changing product mix and the impact of cost increases, and the aged stock remains low at 2.2% of total inventory at the period end.
BLG Executive Chair, Jason Murray, shared, “While we are cautious on the near-term macroeconomic outlook, our vertical model and the deep retail sector experience of our team gives us the ability to respond and adapt rapidly. We will continue to invest in our ‘good, better, best’ pricing strategy, while focusing on effectively managing all controllables, including inventory and costs. Alongside this, we will continue to invest to deliver our growth strategy, with six new stores scheduled to open in the second half.”
Like Murray said, in H2 FY23, the Best and Less Group will open six new stores, including one in the Macquarie Centre in Sydney. It is also launching cost management initiatives to match current trading conditions (perhaps it will join the layoffs bandwagon).
It is still early in H2 FY23, and there is no telling what economic conditions will look like in the coming months. If all goes well, Best and Less expects to deliver a second-half pro forma NPAT of about $18 million to $20 million, still lower than the H2 FY22 NPAT of $21.4 million.
With its anticipated H1 FY23 results, the Company has set expectations for the ongoing financial year. The Company will announce its audited H1 FY23 results on February 21, 2023.
Alinda is a Business Reporter for The Sentiment
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