Bonmarché issues profit warning as good Q1 turns into tough Q2

By

Sandra Halliday

Published
Sep 27, 2018

Value women’s fashion retailer Bonmarché Holdings has had a disappointing time in the last couple of months and on Thursday issued a profit warning after Q2 failed to deliver.

It was all very different from late July when the company had said that the first quarter of its current financial year had seen “significantly better” trading than the last quarter of the previous year.

So what’s gone wrong? Well, while the weather has had an effect, it seems that changes in the overall market and consumer sentiment are the big issues.

For the current Q2, it said that “online sales have continued to grow strongly, in line with expectations, but sales in the stores have not maintained the momentum gained during Q1, and are below expectations. The continuation of warm weather for an extended period may have delayed demand for early autumn stock, but we believe that the more dominant factor is that underlying consumer demand for the UK high street is weaker which is impacting footfall.”

The encouraging start to the financial year, especially as far as like-for-like sales were concerned, had led it to predict “further profit growth during [the current] FY19.”

But now, “in light of the recent downturn in store trading, the board has reviewed the company's forecasts for the remainder of FY19,” it said. Online sales are expected to grow “at least at the rate seen recently, through further improvements to the online shopping experience, and the extension of online exclusive ranges.”

However, “due to the uncertainty regarding high street footfall, we believe it prudent to reduce the store sales forecast for the second half of the year.”

It added that it has cut back on planned group “discretionary operating expenditure for the balance of the year... where appropriate, but a measured view has been taken, so as not to jeopardise the ability of the company to implement improvements designed to deliver growth in future years.”

As a result of these changes to the store forecast, underlying pre-tax profit for the group for FY19 is now expected to be around £5.5 million, which is a hefty drop from the £8 million achieved a year ago.

That bad news hit its share price hard with a drop of around 22% in early trading on Thursday.