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Footasylum tumbles as it warns on earnings
Shares in Footasylum nosedived after the footwear and apparel retailer reported a rise in full-year earnings but warned that earnings for this year would be hit by increased investment in its stores and website on what was turning out to be a bad day for retailers, with department store chain Debenhams warning on profit.
In the year to 24 February 2018, adjusted earnings before interest, taxes, depreciation and amortisation were up 12% to £12.5m, while adjusted pre-tax profit increased 4% to £8.4m and revenue pushed up 33% to £194.8m, with strong growth across all channels and product categories.
Meanwhile, online sales - which now account for 30% of total revenue - were 41% higher.
During the year, the company opened 10 new stores, refitted two stores and upsized seven stores. It also continued its investment in the footasylum.com website and further investment in other online platforms with the launch of an own brand website, and apps for the Footasylum, Kings Will Dream and SEVEN brands.
Chief executive Clare Nesbitt said: "We are pleased to report a strong performance for the financial year, our first as a quoted company following our successful IPO last November. We have delivered broad-based growth across all of our channels and product categories, while also continuing to invest in our infrastructure and talent in order to support further long-term expansion.
"While our core target market of the 16 to 24-year-old consumer has proved to be comparatively resilient in a downturn, our trading since the beginning of the new financial year has undoubtedly been impacted by the widely documented weak consumer sentiment on the high street.
"Despite this, we are confident that continued investment in digital and in our stores will allow the company to deliver strong revenue growth for the full year in line with market expectations. This includes increased investment in our consumer offering ahead of our usual peak trading period in the second half and delivering additional store upsizes alongside new store openings."
However, Nesbitt said this will have an associated increase in both expected capital expenditure and property costs for the current year, meaning it now expects adjusted EBITDA for FY19 to show "more modest" growth than in FY18.
Peel Hunt changed its stance on the stock from 'hold' to 'reduce'.
"FY18 numbers are in line with expectations but the outlook statement is unfortunately flagging a couple of issues which means that forecasts have to fall today.
"There are lots of elements to like about the Footasylum story: the brand is growing top line fast but there are longer term concerns about product allocation that won't go away. Negative forecast momentum will not be taken well by the market, and we would expect the shares to struggle today."
Meanwhile, Liberum said: "Footasylum remains a high growth business, is investing wisely and the story remains very much intact, though it is clearly disappointing to be cutting numbers by 25%."
At 0945 BST, the shares were down 47% to 89.05p.