Very drives Shop Direct sales higher but Littlewoods stumbles
Shop Direct had a reasonably good year on some levels in the 12 months ending June 30, but it was by no means perfect, although the privately-held company on Wednesday talked up its performance due to its confidence in its fast-expanding Very brand.
The company reported higher revenue, profits and customer numbers, helped particularly by that Very brand, although other brands were less strong and it still made a statutory pre-tax loss.
Shop Direct also operated webstores under the Littlewoods, LittlewoodsIreland and VeryExclusive names during the year but has now integrated VeryExclusive into Very.
It said that overall revenue rose 1.5% to just under £1.96 billion. But Very revenue was up 9.9% to £1.389 billion in the 52 weeks.
Very’s rise was a key factor in group profit on an Ebitda basis being up as much as 11% to £262.3 million. And the strength of the Very brand could also be seen from customer numbers with an 8.5% increase to 2.82 million at the unit, while overall group customer numbers rose only 2.2% to reach 4.02 million.
Group operating profit before exceptional items grew 9.5% to £224.6 million but the statutory loss before tax was £24.7 million, almost as much as the prior year’s £24.9 million, “driven by the further provision of £128 million to cover additional customer redress and a provision of £22.5 million to cover closure costs associated with the new fulfilment centre.”
But the company was keen to accentuate the positive and said that Very’s strength last year came both on the back of it attracting more customers and also on increased use of its app.
Orders from the Very smartphone app increased 39.5% year-on-year to represent 25.4% of total orders across all devices, compared to 19.5% a year ago. On average, app customers visited the site twice as frequently as other customers and the app had a 10% better conversion rate compared with other sales channels. Sales via mobile devices increased 5 ppts year-on-year to 74% of total online sales, up from 69% a year earlier.
And visits to the Very website also grew, by 11.6% to 374.4 million, helping to increase total visits to the group’s sites by 5.8% to 520.8 million.
However, the fact that the outperformance wasn't spread across all of the firm’s brands was an issue. Littlewoods was less impressive than Very and its revenue fell 14.5%. Meanwhile the group gross margin declined by almost one percentage point to 39.9% from 40.8% in the prior year due to a “higher proportion of Electrical sales, the mix effect of the continued decline of Littlewoods and the challenging external environment.”
Group CEO Henry Birch stayed upbeat and said of all this that “four months into my role as CEO, I’m hugely excited by the potential of Shop Direct. Today we’re announcing results that show a good underlying performance in a competitive external market.
“Impressive growth in Very, and increases in group revenue and Ebitda show the resilience of our business, which is mobile-first, multi-category, and both a retailer and a credit provider.”
But he couldn't ignore the difficult retail environment out there and also said that while “we’re trading in line with our expectations and preparing for the important peak season, it’s a changing and competitive market.” However he stressed that the current “growth trajectory and differentiated customer offer gives us confidence for the year ahead.”
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