Unbound trading disappoints, firm to focus on growth initiatives, cost control
Unbound Group, the owner of the Hotter
First that weaker-than-hoped-for performance. So far in the year that ends on 5 February (FY23), its sales have slowed as “trading conditions in the second half of the financial year have been more challenging”. The prolonged heatwave, postal service industrial action and broader economic conditions all “significantly impacted” sales of its AW22 range in the final five months of last year.
That came after it had seen a strong start to the year. But a poor Q3 and November performance and only a small return to growth in December and in January so far have definitely made it a year of two very distinct halves.
Full-year revenue is now expected to be £53 million-£54 million, up 3%-4% on the year. Gross margins have been broadly in line with expectations and the business now expects a pre-IFRS16 adjusted EBITDA loss of £0.75 million-£1.25 million. The adjusted pre-tax loss should be £4.25 million-£4.75 million (both before exceptional costs and after non-recurring costs of around £1 million), all below current market expectations.
Unbound added that “despite the short-term challenges experienced”, the group is “well positioned for” an enhanced SS23 product portfolio launch “supported by well-balanced inventory levels”.
Following the success of recent sourcing trials, it will be introducing incremental new product styles, including a new range of athleisure products.
The group currently has 11 partner brands that have gone live on its extended platform over the past five months. It expects to sign further partnerships in 2023 “and still sees significant scope for growth and complementary brand diversification over the medium term”. However, given the current consumer backdrop, the partnership model “has had a slow start to trading, as management has focused attention on its core Hotter brand”.
EFFICIENCY AND GROWTH
All of which brings us to the focus on efficiency and growth. In line with its strategy, annualised cost savings of around £2.3m have already been identified within its existing operating model, with £1.3 million being realised across Q4 of the current financial year and into Q1 of the next year (FY24). A further £1 million will be realised across Q2 and Q3.
And it has accelerated its planned review of its operating structure aimed at streamlining activities and simplifying processes in order to drive growth of revenue and profits.
Areas being looked at include “the most appropriate structure and strategy for the future of its US business, which contributes 11% of revenues”; broadening the product range to “ensure that styles remain relevant and attractive to the consumer but with reduced SKUs and resultant business complexity”; and further development of its trading platform.
More details of all this will be published along with its FY23 results in May.
CEO Ian Watson said: “Since our strong start to the year, trading in the second half has been disappointing, with weakened demand from the current economic slowdown and a number of external factors. However, we are pleased that margin discipline was maintained.
“Our core brand Hotter retains a highly loyal and engaged customer base. We will focus on a broader product range, driven by our insight into our customer’s needs, attitudes and behaviours.
“As we continue to navigate our way through the current challenging consumer backdrop, I remain confident in the long-term future of Hotter and the wider Unbound platform as we build strategic partnerships with brands who want to partner with us to target our group’s key demographic.”
