Even as prices soar in everyday stores, Aussie mums are not about to strike a compromise. When buying clothes for their kids, they want the best, even if that means spending more. Perhaps that’s why, even when online shopping is all the rage, retail company Best & Less (ASX: BST) is witnessing its online sales fall by nearly 33%.
Through 20 weeks of trading in the first half of FY23, the Company’s total sales are 22.8% ahead of the first 20 weeks of FY22. Like-for-like (LFL) sales of all its stores, acquired or otherwise, are down 7.4%, with store LFL sales down 2.3% and online sales down 32.9%. As per its business update, the numbers have suffered for a while as sales in the prior corresponding period were significantly impacted by lockdowns and trading restrictions in several states.
Over 80% of Aussies shopped online during Covid, spending billions of dollars on various products. Best & Less didn’t get as much of the profit pie, as in FY22, the Company’s net profit was down from $47 million in FY21 to $41 million, with EBITDA falling from $71.6 million to $62.5 million.
What has been keeping people from shopping Best & Less? There is no apparent reason.
Best & Less Executive Chair, Jason Murray, said, “After a slow start to summer, we are starting to gain positive trading momentum, supported by our recent investment in lower prices and excellent seasonal inventory position.
“With six weeks to go and the major shopping season ahead of us, we expect a strong finish to the half and for our summer product to perform well through Q3. Looking ahead, we expect value conscious shoppers to continue to be attracted to our differentiated specialty value offer, and we will retain our relentless focus on preserving margins and driving cost efficiencies.”
For the first eight weeks of FY23, the Company reported a 38% sales growth. Since then, this growth has cooled, thanks to summer taking its sweet time to arrive and supply chain delays. Plus, Best & Less is coming out of inflated sales in Q2 FY22, when NSW, Victoria, and New Zealand emerged from lockdown, and consumers returned to shopping in re-opened stores in large numbers.
While the results up till now might not infuse you with optimism, the Company has not lost all hope. With the significant shopping season ahead, including Black Friday and Christmas, the Company expects a solid finish to the first half of FY23, with nearly 60% of the first half profits typically recorded in the final six weeks.
The Company is poised well in terms of inventory, having sold through significantly more winter stock than last year (thanks to the long and harsh winter), with aged stock representing only 1.8% of total inventory. Nearly all seasonal stock is new summer stock, which is expected to trade well throughout the summer period. To date, the average sale price remains above last year, supporting a robust gross margin outcome, and costs are being managed carefully.
To truly thrive in FY23, Best & Less needs to see a significant increase in sales growth to keep results up for the first half. Will the season’s spirits reach the Company, or will it be a Hit & Miss?
Alinda is a Business Reporter for The Sentiment
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