From Nov 24 results15 Mar 2025 19:34
Strategic update and results summary
· Back to Fashion targets met: Stock clearance complete, new commercial model embedded, Test & React scaled above 10% of own brand sales, flexible fulfilment doubled and unit economics transformed with variable contribution per order now +28% on FY22. Foundations of more agile and profitable business now in place.
· Significant cash flow improvement: FY24 adjusted EBITDA of £80.1m, at the top end of consensus expectations, and £37.7m free cashflow, a £250.7m improvement year-on-year ('YoY').
· Stock transition complete: inventory down c.50% since FY22 to £520m, through disciplined stock management and c.£100m write-down to complete transition to the new commercial model by end of FY24. Stock position now offers greater newness for customers, with aged stock down c.75% YoY and >80% of stock under 6 months old.
· Continued optimisation of profit contribution over revenue, resulting in FY24 revenue decline of 16%4 YoY, in-line with guidance provided in our September trading update.
· New commercial model resonating with customers: sales of newness +24% YoY over the last 3 months (Jul-Sep) with only 6% higher stock, demonstrating strong demand for full-price product. Offset at group level by c.30% YoY decline in sales of old inventory from c.60% lower stock levels. Importantly, this has a sustainable positive impact on gross margin and profit, despite the near-term revenue headwind.
· Balance sheet strengthened significantly following the year end through a comprehensive refinancing and proceeds from the formation of the Topshop and Topman joint venture6 (TSTM JV).
· Strong foundations now in place, shifting focus in FY25: focus on taking actions to delight customers, doubling Test & React to 20% of own-brand sales, further scaling FF models, adding exciting brand partners, empowering faster innovation through our Technology and Digital Product transformation, launching loyalty programme, launching Topshop.com, and further tackling the causes of unnecessary returns.
· In FY25, driven by a significant increase in our full-price sales mix, we expect at least 300bps increase in gross margin to over 46% and adjusted EBITDA to increase by at least 60% to £130m to £150m, including the impact of the TSTM JV. FY25 FCF expected to be broadly neutral, with capex of c.£130m and cash interest of c.£35m.
· In the mid-term our focus remains sustainable, profitable growth. We continue to expect revenue growth, gross margin towards c.50% and an adjusted EBITDA margin of c.8%, sustainably ahead of capex, interest, tax and leases.
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