Sosandar Share Price (SOS)

Sosandar Joint CEO’s Julie Lavington, Ali Hall and CFO Steve Dilks outline FY24 Highlights, followed by Q&A.

Watch the video here: https://www.piworld.co.uk/company-videos/sosandar-sos-full-year-2024-trading-update-april-2024/

Or listen to the podcast here: https://piworld.podbean.com/e/sosandar-sos-full-year-2024-trading-update-april-2024/

PIs are a fickle bunch. These results were as good as baked in following the strategy pivot. SOS may have fallen short of its revised sales and profit targets but only fairly marginally. To have set a revised sales target of £46.8m and only fallen short by £500k in the current economic environment is actually no mean feat (the small loss, as opposed to the small profit, more or less followed the sales shortfall).

SOS's revised strategy is beginning to pay dividends (the profit before tax in H2 FY24 more or less matched the profit before tax in FY23. Overheads have risen but that was to be expected given SOS's new overseas activities in Australia and Canada from mid-Q3 FY24 onwards (which should now help bolster prospective H1 FY25 sales) and the push into bricks and mortar (costs are being incurred despite no stores having yet been opened). The delay in opening new stores (I think that at least one store was expected in Q4 FY24) might be disappointing but is in keeping with the management's cautious approach (they've proven themselves capable of being reactive to evolving events and I trust them to only move forward when they think the time is right and/or have the cojones to cut their losses if needs must).

They missed their revised sales target by c£500k which, with a c60% gross margin, would potentially have generated an additional profit of c£200k. A miss maybe, but not a disaster.

Overall, not too bad when you consider the current economic backdrop and how their peers are currently performing.

Looking forward, following the strategy "pivot" in mid-Q2 FY24, I'd currently expect SOS to breakeven in H1 FY25 based on H1 FY24 LfL sales and H2 FY25 gross margins and operating expenses. However, SOS is currently targeting a 17% increase in overall FY25 sales (c£54.6m) and, allowing for an increased weighting to H2, then a (say) 10% increase in H1 sales would be the current expectation which should then deliver an H1 FY25 profit of c£1.3m. Whether SOS thinks it can stay on target to deliver a 17% increase in sales in FY25 in the current economic environment remains to be seen.

I think we have to accept that it's currently a very challenging retail environment and if in H1 FY25 SOS can deliver both an increase in sales and profits in excess of (say) £500k then I think that would be a positive outturn. SOS made a handbrake turn in mid-Q2 FY24 and it was always going to take at least 12 months to wash through (including being able to pare back the additional marketing overheads that would have taken on in expectation of a renewed and enlarged marketing drive) and if SOS had continued with it's previous strategy of chasing sales at the expense of gross margins, it's probable that its FY24 loss would have been significantly higher IMHO; when people are tightening their belts it becomes unrealitic to expect an additional (say) 10%+ increase in sales just to offset not only the gross margin that you are foresaking but the increased marketing and other overheads.

"As a result of a substantial positive swing in PBT from H1 (£1.3m loss) to an expected profit of £1.1m in H2, FY24 will be broadly in line with market expectations* with a marginal loss of £0.2m expected to be reported for the year overall"

So that's a miss then.

One day, maybe, they'll deliver what they promise and long suffering holders will be rewarded - but I guess we'll have to wait a bit longer.

Https://www.retail-week.com/fashion/data-sosandar-and-superdrug-smash-ecommerce-growth-find-out-how/7045862.article