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Footasylum issues profit warning as discounting erodes margins

Footasylum has warned that its full-year profit and margins will be lower than expected after it was forced to discount heavily to keep up with its competitors over Christmas. 

Total revenue was up 14% to £102.3m for the 18 weeks to 29 December, compared with the same period in 2017. Store revenue grew by 5% to £63.7m, while its wholesale revenue doubled to £2.6m.

However, the firm warned that tough trading conditions and discounting over Christmas meant its full-year revenues and margins would come in below expectations.

“The challenging trading conditions reported in the first half have continued throughout the Christmas trading period,” the retailer said.

”UK economic uncertainty and weakening consumer sentiment have led to some of the most difficult trading conditions seen in recent years.

“Against this market backdrop, promotional activity and discounting across the retail sector were higher than anticipated, with the result that Footasylum’s levels of promotional and clearance activity were greater than expected during the period. Consequently, while the company has sustained its revenue growth across all channels, gross margin has been lower than previously expected for the period.

“Therefore, while Footasylum continues to expect to report FY19 revenue in line with consensus expectations, FY19 gross margin is now expected to be lower than current consensus expectations.”

Online performed strongly, up 28% to £36m, and on a year-to-date basis now accounts for 33% of total revenue, up from 30% in the same period in 2017.  

The firm said online continued to “deliver revenue growth across all channels and all major product categories”. 

Shares in Footasylum fell by almost 14% following the trading update.

In November, Drapers reported that Footasylum faced credit insurance cuts following a series of profit warnings. 

 

 

 

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Readers' comments (1)

  • Classic case of a business not having enough confidence in itself, and following a discount trend. They'll regret it.

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