LONDON (Alliance News) - Koovs PLC on Wednesday reported a pretax loss in its last financial year as it increased marketing and overhead costs in a bid to build the online retailing business, although revenue rose as visits to the website continue to grow.
Shares in Koovs were trading down 28% at 45.67 pence Wednesday morning following the announcement.
The Indian online fashion retailer, which allows third parties to sell branded fashion garments through its website, said that it made a pretax loss of INR922.6 million in the year ended March 31, 2015, although revenue rose to INR204.1 million. This compares with a INR202.2 million loss in the six months to March 31, 2014 on revenue of INR64.4 million.
Koovs was incorporated as an online fashion retailer in October 2013 following its acquisition of Koovs India. Prior to this, its principal activity was to provide design and merchandising services to Koovs India. Its financial results for the year ended March 31, 2015, therefore only can be compared to the six-month period between October 1, 2013 to March 31, 2014.
It said that it achieved strong sales growth at koovs.com, with visits to the website up 177% in the year at a compound weekly growth rate of 2.5%.
However, profit was hit by higher marketing expenditure in an Indian market which Koovs said is "growing extremely quickly", adding that heavier-than-anticipated marketing investment will continue in order for it to achieve its goals in the competitive environment.
Gross margin is also being compromised by low volumes, Koovs said, as its overhead structure is "considerably higher" than the gross profit generated.
"We expect therefore to generate trading losses in the immediate future as volumes and gross margins improve with the development of the brand," the company said.
Koovs added that KOOVS.COM achieved sales growth of 187% in the 26 weeks to September 2015, and that it is adding British online fashion retailer boohoo.com to its brand portfolio.
"We are pleased to report another strong set of results, as we continue to deliver on our strategy. We continue to reinforce our credentials with the fashion-forward Indian consumer, expand our own label and branded proposition and introduce more easy ways to shop with us. Looking to the future, we are determined to continue growing market share and see significant further opportunity ahead as we transform Koovs into the number one western fashion destination in India," Chairman Waheed Alli said in a statement.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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