Specialty bounces despite tough market

Specialty Fashion Group, which owns a portfolio of women’s fashion banners such as Millers, Katies, City Chic and Crossroads, has bounced back into the black with a full-year net profit of $13 million despite choppy conditions marked by low consumer confidence and industry wide discounting.
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The retailer actually recorded a loss for the June half of $5 million, but strong momentum from the first half of fiscal 2013 driven by comparable store sales growth, better lease terms and keeping a hold on business costs helped push the company into profit territory.

It posted a $2.8 million loss in 2011-12.

Revenue for the year was $569.5 million, down 0.5 per cent, but it recorded underlying positive comparable store sales growth of 0.4 per cent flowing from a net decrease of seven in its store numbers.

The return to profitability was also bolstered by widening margins, despite being in the midst of a retail environment dominated by intense price competition and discounting, with the highest gross margins achieved in the company’s history at 61.8 per cent.

The company said it had rationalised underperforming stores, fulfilling a promise to exit costly or uneconomic store locations and pour more resources into its online channel, with 40 new stores and 47 closures executed during the year. This has taken its total store count to 886 at the end of 2012-13.

Specialty Fashion has declared it would close up to 120 of its stores over the next three years as it recalibrates its business to move away from pricey rental locations in shopping centres in favour of online sales.

Specialty delivered Earnings Before Interest Taxation Depreciation and Amortisation (EBITDA) of $41.1 million, compared with EBITDA for the prior year of $21.7 million. It said it was in a very strong financial position with cash levels of $38.6 million, its highest level in seven years.

Specialty Fashion chief executive Gary Perlstein, said: “Specialty Fashion Group grew profit in financial 2013, despite difficult economic conditions that affected the entire retail industry, particularly during the second half.

“This improvement is in large part due to significant operating enhancements that drove a record gross margin, along with flat costs of doing business. We are pleased with the progress we have made with our omni-channel strategy, with online becoming an increasingly important contributor to future growth.”

The retailer’s online store was again a standout performer within the group, with online sales up 50 per cent to $21.9 million, against $15 million the year before. Its online sales now represent 3.8 per cent of total revenue.

A final dividend of 2¢ per share was declared, taking the total payout for the year to 4¢ per share. No dividend was paid in 2011-12.

Shares in Specialty Fashion were down 1¢ at 87¢ at noon.

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