Best & Less Group (BLG) has cited a delayed start to summer weather and supply chain delays for a drop in trading momentum for the first half of FY23, despite a 5% growth in like-for-like (LFL) sales in December and higher sales in core nondiscretionary product lines across the baby category.
It also noted that consumer demand and foot traffic were weaker than anticipated in the first half, with the company taking action to reduce inventory risk and strengthen price perception, which impacted gross margin percentage.
Notwithstanding this, the average sale price for the half was up +9.5% higher than the prior corresponding period (PCP). The company said that, because of this, its inventory remains well positioned, where it successfully sold through the bulk of winter stock and with summer stock continuing to trade well in Q3.
The company’s total stock on hand at the end of the half was +8.9% higher than PCP - in dollar terms at $104 million - however with 5% fewer units due to changing product mix and the impact of cost increases. Aged stock remains low at 2.2% of total inventory at the period end.
The combination of a lower gross profit margin percentage and softer than expected sales in the first half resulted in an unaudited preliminary pro forma net profit after tax (NPAT) of $13.7 million, more than a quarter lass than PCP ($20.1 million).
BLG have accrued a total revenue of $324.8 million in the first half of 2023 (up 13% on PCP), with LFL sales down (-4.9%) on prior period. Store LFL sales were down -0.9% and online sales dropped -29.8%.
For the first three weeks of January, LFL sales were up +13.7%, with store sales up +18.6% and online sales down -23.1%. Best & Less said that trading in the PCP was impacted by the Omicron outbreak.
In H2, BLG is expected to open six new stores, including one in the Macquarie Centre in Sydney. The Company said it is also implementing cost management initiatives to realign its expense base for the current trading conditions.
BLG expects to deliver a second half pro forma NPAT of between $18.0 million and $20.0 million, while acknowledging that it is early in the second half and assuming no material deterioration in economic conditions that impacts sales. This compares to H2 FY22 reported pro forma NPAT of $21.4 million, which included a $1.6 million NPAT contribution from the 27th trading week in that half.
BLG executive chair Jason Murray said while the company remains cautious, its vertical model and long retail experience can help it respond and adapt quickly.
“We will continue to invest in our ‘good, better, best’ pricing strategy, while focusing on effectively managing all controllables, including inventory and costs,” Murray said. “Alongside this, we will continue to invest to deliver our growth strategy, with six new stores scheduled to open in the second half.”