Challenging conditions mean Seraphine re-sets ambitions after strong 2021

By

Nigel TAYLOR

Published
May 5, 2022

Maternity-wear brand Seraphine managed to perform well in the year ended 3 April, despite “significantly more challenging market conditions”, the stock exchange-listed international online retailer said in its trading update Thursday. But don’t expect that performance to last.

Since the previous trading update on 23 February, Russia's invasion of Ukraine meant it has experienced “weakening consumer sentiment across Europe”. Add to that the rising cost of living and growing production/delivery costs and Seraphine admitted it “has not been immune to these sector-wide pressures”.
 
But at least its strong business model fundamentals and leading market position helped deliver “strong year-on-year revenue growth” in the period to the start of April. 

Overall, sales jumped 33% on a constant currency basis with 52% growth in North America, “where the business sees further significant opportunities for value creation”.
 
Seraphine said it has “launched and achieved excellent sales growth” in Canada, Switzerland and the Netherlands, “demonstrating the wide appeal of its product, and its ability to roll out and scale up effectively in new markets”.
 
But as conditions get tougher, Seraphine admitted those numbers will be tough to repeat. 
 
“Given well-reported sentiment issues affecting the industry, the group believes it prudent to re-set market expectations for FY23 and now expects to deliver sales growth of 10-20% and an improvement in EBITDA (pre-IFRS16) margin to 8-9%”.
 
It cited a number of margin and costs challenges, with notable inflation in distribution costs and customer acquisition marketing costs while additional one-off non-cash corrective items, including customer refunds and stock adjustments, have been identified.
 
“As a result of these issues and the macroeconomic headwinds, we now expect FY22 sales of circa £44.1 million and Adjusted EBITDA (pre-IFRS16) of not less than £3 million”, it said.
 
However, there are actions Seraphine is taking “to strengthen the business and enhance shareholder value”. This includes a strengthened executive committee with the appointment of a trading director and COO; a strategic re-pricing “protecting entry level product pricing while increasing more premium items which have traditionally delivered exceptional value”; and investment in innovative product design and in-house creative marketing.
 
CEO David N Williams said: “While we are disappointed that a combination of internal and external factors has affected the outturn for the year and expect consumer sentiment to remain subdued in the short term, we are confident in the strong underlying fundamentals of the business and our ability to scale up and deliver growth in the medium term. 
 
“We will also benefit from the steps we have taken to strengthen our executive and operational management capability across the team.”