London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
A lot of rubbish being spouted on bulletin boards today IMHO.
Here are some key take outs:
1) SOS is not immune from the general economic malaise;
2) Shoppers currently have less discretionary spending and arguably, at least in the short-term, most spending on clothing is discretionary to a greater or lesser extent;
3) Discounting to try and increase revenues when people increasingly have a specific need and only a fixed budget to spend can backfire e.g. you're better off selling two garments at £100 than three garments at £100;
4) Discounting to increase revenues does not always boost the bottom line e.g. if you drop prices across the board by, say, 10% then you need a c22% increase in revenues (from your lower base) just to achieve the same level of gross profits, all other costs being equal;
5) SOS hasn't ruled out all discounting;
6) SOS geared up its operations, in accordance with its original budget forecasts, for a substantial increase in FY24 revenues which, as H1 progressed from Q1 to Q2, became increasingly apparent was no longer achievable;
7) Having previously committed to a more rapid expansion of sales and having recruited and trained additional staff to facilitate said expansion, SOS couldn’t just shed those additional costs immediately;
8) SOS moved from one sales strategy in Q1 to another in Q2 and I’d hazard that it probably incurred an additional c£500k-£1m of operating costs in H1 than it might have done had it anticipated that the economic climate would require this strategic change 6-18 months ago;
9) I’d also hazard that if SOS had continued to pursue a strategy of discounting to increase revenues in Q2, rather than maintaining gross margins, its operating loss would have been even higher i.e. the additional revenues would not have been able to make up for the loss in gross margin (I suspect SOS would have modelled this based on H1 trends before making the decision);
10) You have to adapt and change with the times rather than fretting over spilt milk;
11) SOS has never been shy of changing its modus operandi when needs dictate e.g. COVID, regardless of the short-term impact (SOS has always preferred to act rather than wait in hope);
12) It's clear that SOS has taken on additional operating costs to prepare the ground for international expansion and new bricks & mortar outlets (I wouldn't be surprised if these additional costs exceed £1m pa);
13) These additional (discretionary) costs can be shed further down the road if the plans do not progress;
14) The demise of the UK high street is much overstated - even Shein operates bricks & mortar outlets in the UK! (one has to assume that fashion retailers have a far better understanding of their business needs than most armchair analysts); and
15) A high street expansion in the right locations is not necessarily doomed to failure, as some like to suggest, but you have to reckon with a 2-3 year payback period
With reference to my point (3) below, I'd accept that by not discounting SOS may have lost out on some customers who are more price driven than product/quality driven but it's difficult to target discounts at just those customers alone (unless they fall into the catch-all of new customers) i.e. you either have to offer discounts to all or accept that you will miss out on some opportunities. This would likely have been factored into SOS's internal assessment of whether or not to continue to try and chase revenues in the current market environment or maintain margins.
Also, today's announcement does not mean that SOS couldn't revert back to the previous strategy in FY26 and beyond if the market environment became more benign. Maintaining margins and cutting their cloth to fit is a reflection of the times and it would appear that SOS expects the current market environment to persist into FY25 at least.
It's a set back but not a knock out.
The overseas expansion plans seem sensible and the costs controllable. Also, it remains to be seen whether there are any benefits to be garnered from the southern hemisphere seasonal cycle being the opposite of the northern hemisphere. SOS could potentially be launching its summer/autumn collections into Australia at the end of FY24. Whether those collections will be based upon its existing 2024 collections, its intended 2025 collections or a mix of both will be interesting. It's rarely cost effective to ship any unsold stock from one country to another and one assumes that stocks supplied to their partners in Australia and Canada will be supplied direct from their suppliers.
One would assume that any roll-out of bricks & mortar outlets will be done slowly and steadily. A half dozen outlets over a couple of years in a selection of handpicked locations should be manageable as a proof of concept.
Your timing seems good..AIM shares are on the floor..Did you know that in 2022,AIM market was the WORLD'S worst performer,so the only way is up (but not in a straight line) Sosandar is a minimum 2 year hold..The problem is most of us have bought shares previously when SP was higher and now face a long wait just to break even
Yes but Sos is now not worth more than 4p. There is every chance that the stock will be bust within 2 years. It is in the worst business at the worst time. Things are getting worse and the future is dire. More tax on the way and a lot more conflict.
Not the fault of the company. A terrible time to be in small caps like this. Most will go bankrupt
Please explain how you get to 4p valuation.
If they get to £10 net profit and are still growing in 2025 then on 15x multiple the share price could be 59p. Although with continual share awards it might be more like 50p.