Fashion and sports sales edged up 0.9%, including strong growth in women’s and children’s sports clothing

Fashion and sports sales edged up 0.9%, including strong growth in women’s and children’s sports clothing

Digital pureplay retailer The Very Group, formerly Shop Direct, has returned to profit for the full year as revenue topped GBP2bn (US$2.6bn) for the first time. 

The company, which owns the site and is the UK's largest pureplay digital retailer and financial services provider, said for the 52 weeks ended 30 June, profit before tax amounted to GBP48m, an increase of GBP233.9m on the prior year, which saw it report a loss of GBP185.5m.

While underlying EBITDA was slightly lower by 2.9% at GBP264m from the GBP272.4m reported last year, it was in line with guidance provided in August, with volume growth and cost efficiency largely mitigating GBP12.4m of Covid-19 impacts. retail sales increased by 10.5% to GBP1.23bn, driving revenue up 6.8% to GBP1.59bn and group revenue growth of 2.9% to GBP2.05bn. Its share of the UK non-food market grew by more than 1 percentage point in the final quarter.

Strong sales growth was seen across most product categories, with fashion and sports edging up by 0.9%, including strong growth in women's and children's sports clothing, at 21.6% and 22.6% respectively.

Very introduced over 100 new brands and expanded its existing relationships in the period, including adding Topshop and Mint Velvet in fashion, and growing existing brands including Tommy Hilfiger, Barbour and Hugo Boss. customers, meanwhile, grew 14.1% to 3.4m during the year, up from 2.98m in the prior 12-month period, and increasing growth in group customers of 10.6% to 4.48m.

Group gross margin declined 3.1 percentage points to 36.5% from 39.6% a year prior, reflecting lower financial services income, additional Covid-19 bad debt provisioning and the change in product mix seen in the fourth quarter following the impact of Covid-19.

"Despite the unprecedented challenges of the pandemic, the business has proven its adaptability yet again," said CEO Henry Birch. 

"The economic landscape will remain unpredictable. However, we believe our flexible and resilient business model, which gives customers access to the brands they love via flexible ways to pay, will help us thrive as customers continue to rely on online shopping. Our purpose, 'to make good things easily accessible to more people', has never been more relevant."

Very finished the year with a cash balance of over GBP200m, resulting in a reduction in net debt of GBP144m.

It also cited a strong start to FY21 with first-quarter retail sales in double-digit growth.

Alex Hardy, retail a nalyst at data and analytics company GlobalData, notes a broad category offering has been integral to The Very Group's strong performance throughout the Covid-19 pandemic, with consumer preferences transforming almost overnight in the face of a changing environment, helping the retailer to generate a profit before tax for the first time in three years. 

"'s retail sales increased 10.5% compared to last year, primarily driven by an excellent Q4, in which sales soared by 36%, due to the provision of categories that have prospered during the lockdown. These have performed best for the group, with sales of electrical and home categories up 64% and 40% respectively in Q4. Fashion saw reduced demand due to the pandemic, in line with other retailers including H&M, although annual sportswear growth of 14.2% helped to offset the fall. This wide product range has enabled to consistently cater to consumers' varying tastes and achieve success through challenging times."

He adds the opening of a new fulfilment centre, 'Skygate', on the day the UK went into lockdown, proved good timing for The Very Group, as it was well-placed to accommodate the channel shift towards online purchasing during the pandemic. The automated warehousing space has allowed for faster processing of orders and returns, on a greater scale, meaning the retailer has become a reliable and attractive option for consumers, Hardy says.

"The Very Group's credit proposition helped to drive customer growth of 10.6% in the year, with new credit customers up by over 80.9% in the final quarter, as flexible payment options appealed to consumers during a time of economic uncertainty. With shoppers purchasing big ticket items such as home office equipment and garden furniture, the ability to delay payment or pay in instalments has proved invaluable. If the recent uptick in adopters proves to be sticky, the retailer can look forward to a sustained rise in sales.

"While The Very Group was well-positioned to flourish during lockdown, measures such as cost reduction, inventory control and tight management of capital spend have helped EBITDA reach GBP264.4m. This is only a slight decline on last year, despite reduced financial services margins, suppressed demand for higher margin fashion items, and Covid-19 impacts.

"The group continued to manage the decline of, with sales falling 8.8%, with the fascia gradually becoming a small part of the business allowing it to focus on the flagship brand. The outlook remains positive moving forward, with Q1 FY2020/21 retail sales experiencing double-digit growth on last year, due to continued demand for electricals and home.''