Bonmarché still facing tough times, despite strong clearance sale

By

Sandra Halliday

Published
Jan 25, 2019

Budget fashion retailer Bonmarché Holdings issued a trading update on Friday and while its previous downbeat update had only been released last month, at least this one was a slightly - very slightly - more cheerful read.

It included some small improvements, but such baby steps don’t exactly make for a full recovery. The company still faced plenty of challenges at the back end of last year and has many more hurdles to jump over before it gets back to full health.

So let’s look at the detail. The update covered the 13 weeks and 39 weeks to December 29. In the 13 weeks, store-only like-for-like (LFL) sales fell 11.1% while online sales rose 22.2%. Combined, those figures added up to a 7.8% LFL drop and a total fall of 8.1%.

In the 39 weeks, store-only LFLs dropped 6.4%, online rose 26.5% and combined LFLs fell 3.3%, while total sales were down 2.7%.

Clearly, the final part of the calendar year was a lot worse than the earlier period and the company said that following the bulletin issued on December 13, trading during the final three weeks of the third quarter "remained in line with revised expectations.”

And the small improvements? It added that a slight uptick in footfall towards the end of the period means that the store LFL figure was “marginally better” than the negative 12% for Q3 and should be better than the negative 1% for Q4 it had predicted earlier.

There was good news and bad on e-sales. While online sales continued to grow strongly during the period, it was at a lower rate than in the first half of the year. 

But the gross margin didn’t offer any good news as it remained in line with revised forecasts, which means lower than last year due to additional discounting and expected exchange rate headwinds.

At least the winter clearance sale has begun well, and the company continues to trade in line with the revised guidance given in December.

The company also said that its “cash reserves are expected to be adequate to meet its liquidity requirements, even at the lowest end of the PBT [pre-tax profit] range, and during the period when the cash balance is lowest, around the end of March.”

Not that any of this means the company is out of the woods yet, so CEO Helen Connolly tempered her upbeat stance with a big dose of caution.

"Clearly, in the short time since our last update, macro market conditions have not changed, but I am pleased that the sale stock is clearing well and that trading is in line with our revised expectations,” she said. “In the short term, we continue to focus on ending the year with a clean stock position and ensuring that our balance sheet remains healthy.

"Looking forward, the board remains confident in Bonmarché's prospects and strategy and we will continue to drive the implementation of our previously outlined plans, maintaining a particularly strong emphasis on increasing multi-channel sales."