Sosandar PLC (LSE:SOS) (FY24) Earnings Call Highlights: Strategic Growth Amidst Revenue Challenges

GuruFocus News
4 min read

In This Article:

  • Revenue: Increased by 9% to GBP46.3 million for FY24.

  • Gross Margin: Improved by 140 basis points to 57.6% for FY24; Q1 FY25 margin increased by 670 basis points to 63.4%.

  • Profit Before Tax (PBT): FY24 full-year loss of GBP0.3 million; H2 FY24 PBT of GBP1 million compared to a loss in H1 of GBP1.3 million.

  • Cash Position: Strong with a balance of GBP8.3 million as of March 31, 2024.

  • Inventory: Reduced by GBP1.5 million, reflecting a reduced stock requirement.

  • Q1 FY25 Revenue: Decreased to GBP8.2 million from GBP11.4 million in the previous year.

  • Store Rollout: Plans to open stores in Chelmsford and Marlow, with each store expected to cost GBP250,000 in CapEx and GBP50,000 in stock.

  • Average Order Value: Increased by GBP5 year-on-year.

  • Website Conversion Rate: Decreased from 4.1% to 3.4% due to reduced price promotions.

Release Date: July 16, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Sosandar PLC (LSE:SOS) achieved a significant improvement in gross margin, increasing by 670 basis points to 63.4% in Q1 FY25.

  • The company reported a positive swing in profit before tax, moving from a GBP1.3 million loss in H1 FY24 to a GBP1 million profit in H2 FY24.

  • Sosandar PLC (LSE:SOS) has a strong cash position with GBP8.3 million, allowing them to self-fund their store rollout program.

  • The company successfully reduced inventory by GBP1.5 million, reflecting a strategic focus on full-price sales.

  • Sosandar PLC (LSE:SOS) is expanding its retail presence with the imminent launch of its first stores in Chelmsford and Marlow, which are expected to enhance profitability and brand visibility.

Negative Points

  • Revenue in Q1 FY25 decreased to GBP8.2 million from GBP11.4 million in the same period last year, primarily due to reduced price promotions.

  • The company reported a full-year loss before tax of GBP0.3 million for FY24, despite improvements in H2.

  • Sosandar PLC (LSE:SOS) experienced a delay in its store opening program, initially planned for spring 2024, due to challenges in securing the right locations.

  • The partnership with The Bay in Canada was terminated due to technical issues with The Bay's marketplace, resulting in a loss of potential international sales.

  • There is a risk associated with the ambitious store rollout plan, including the potential for overestimating revenue per store and managing operational costs effectively.

Q & A Highlights

Q: What gross margin are you ultimately targeting and over what time? A: Stephen Dilks, CFO, stated that Sosandar is targeting a gross margin between 65% and 70%. This will be achieved by reducing price promotions and leveraging scale from store openings to buy stock cheaper, aiming for a realistic margin of 67.5% to potentially 70% in the coming years.

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