Seraphine has tough first half, H2 remains volatile

By

Sandra Halliday

Published
Nov 8, 2022

Maternity-wear specialist Seraphine issued a half-year trading update for the 26 weeks to the start of October on Tuesday and said product revenue was down slightly with the company also expecting an adjusted EBITDA loss.

Product revenue for the period should be around £19 million against £20.8 million in the previous half year with that EBITDA loss being around £1.5 million.

The company said the period was affected by the continuing challenging retail trading environment and softer trading during the summer months, consistent with the broader retail sector.

Its own digital platform sales fell as much as 9% and dropped around 12% at constant currency, primarily because inflation in marketing costs meant lower than planned marketing spend.

Digital partner revenue was also lower, as expected, as the business managed this channel with a focus on improved profitability.

On the plus side however, trading in its retail stores is beginning to improve with 20% year-on-year growth in the period, although it's still behind pre-pandemic levels. And despite the improvement in this area, its retail stores remain a very small part of its overall business.

The company added that gross sales and basket sizes increased on the year but returns rates went back to pre-pandemic levels, which impacted net sales overall. Yet it noted that unlike some other online retailers, it's not seeing returns levels exceeding pre-pandemic rates. 

It said this was due to the nature of its products, its niche customer, demographic, and its carefully balanced promotions and pricing.

Seraphine also said that inflation in customer acquisition costs reduce throughout the second quarter and it has started to execute its strategy to further diversify its marketing channels. It's optimistic that this will deliver further improvements in customer acquisition costs.

And what of the new season? The start of AW22 was “particularly encouraging, but more recent trading has been weaker, again, in line with the broader sector”. 

It expects volatility in trading to continue throughout FY23 but believes “H2 will be an improvement on H1 as we start to annualise against normalised returns rates and higher marketing costs and take benefit from seasonally higher basket sizes and lower return rates”.

It means H2 should be profitable on a post-IFRS16 adjusted EBITDA basis.