Shares plunge as Sosandar unveils growth plans

18th Oct 2023 11:01

(Sharecast News) - Shares in Sosandar tumbled on Wednesday after the online fashion retailer unveiled ambitious expansion plans, including opening bricks and mortar stores for the first time.

Updating on trading, the AIM-listed firm said having its own shops would boost profits and the brand as a whole.

It continued: "It will bring increased brand awareness, higher margins, more efficient marketing and overall lower return rates. Over the last two years there has been ample and growing evidence highlighting the financial importance of store locations."

Sosandar expects to have opened its first stores by spring 2024 in "affluent towns with thriving high streets", with the investment self-funded from existing cash reserves.

It will also reduce price-led promotions as it moves away from being an online-only retailer.

However, investors appeared unconvinced, and by 1100 BST the stock had lost more than a quarter of its value, down 28% at 12.82p.

Sosandar also announced plans to launch overseas after signing third-party agreements with two retailers, The Iconic in Australia and The Bay in Canada, with online sales due to start in the fourth quarter. Sosandar has similar deals in place in the UK with Next, M&S and J Sainsbury.

In a joint statement, co-chief executives Ali Hall and Julie Lavington said: "We are extremely excited about the next stage of our growth journey.

"While we do expect to see a short-term impact as we transition the business to offer less promotional activity, we still expect to be in growth and remain profitable. This strategy is undoubtedly the right course of action to deliver greater profitability and therefore greater value to our shareholders."

Sosandar's net revenues in the six months to 30 September were £22.3m, compared to £21m in 2022. Pre-tax losses were £1.3m, compared to a profit of £100,000 a year previously, driven by lower revenue following a trialled reduction in promotional activity in the second quarter.

Looking to the current quarter, Sosandar said trading had started "very well" despite the unseasonably warm weather, with "very strong" third-party sales.