Best & Less has reported mixed trading for the start of the 2022-23 financial year which might result in the December half year performance not being as good as the sales figures suggest.
While directors remain confident of a strong finish to the half in the run up to the Christmas selling season, they cautioned that it will require a surge in sales in the next few weeks to match the interim result for 2021-22.
Investors picked up on that equivocation and sent the shares down more than 13% yesterday to $2.35.
The company told the ASX ahead of its annual meeting on Tuesday that through 20 weeks of trading in the first current (first half of 2022-23), total sales were 22.8% ahead of the first 20 weeks of trading in 2021-22.
But while strong, it’s an average and the company said that sales growth slowed from the surging 30.8% growth rate reported for the first eight weeks of the year (from July1).
“(S)ales growth has since moderated, reflecting the delayed start to summer weather and supply chain delays”
The company also pointed out that the current period was being compared to “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.”
The mixed nature of the report was also illustrated by the Like-for-like (LFL) sales comparison. They were down 7.4% overall, with store LFL sales falling 2.3% and online sales just on 33%, with sales in the prior corresponding period were “significantly impacted by lockdowns and trading restrictions in several states.”
“With the major shopping season ahead, including Black Friday and Christmas, the Company expects a strong finish to the first half of FY23, with about 60% of first half profits typically recorded in the final six weeks.
“While unaudited year to date earnings to the end of October are in line with the previous corresponding, a significant increase in sales growth from current levels is required to maintain this result for the first half..,” directors said.
Best and Less reported a pro forma earnings before interest, tax, depreciation and amortisation of $30.6 million for the December, 2021 half year compared to $38.4 million in first half of 2020-21.
Best and Less said its inventory position “is excellent”, having sold through significantly more winter stock than in the same half of 2021, with aged stock representing only 1.8% of total inventory.
“Nearly all seasonal stock is newly arrived summer stock, which is expected to trade well throughout the summer period. “The average sale price to date remains above the previous corresponding period supporting a robust gross margin outcome, and costs are being managed carefully.”
“With the expected benefit of sales being deferred to second half of 2022-23 and assuming the absence of the impact of COVID as experienced in the PCP, second half sales are expected to exceed the PCP and gross margin percentage to be in line with that achieved in the PCP.
Best and Less Executive Chair, Jason Murray, said in Tuesday’s statement: “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.”
