Hotter owner Unbound sees sales growth as shopper category interest normalises

By

Sandra Halliday

Published
Sep 20, 2022

Unbound Group — best known as the owner of the Hotter footwear brand — released its interim results on Tuesday with strong sales growth as the company continues its transformation into a multibrand retailer.

For the six months to 31 July, it saw “continued growth and strategic progress in a challenging consumer environment”.

Revenue rose 10.4% to £27.6 million (“illustrating benefits of [the] multi-channel sales model despite challenging market conditions”), while the gross margin expanded 180bps to 63.4%. That came on the back of progress in its efficiency plan and the delivery of its product strategy. It resulted in gross profit growth of £2.1 million.

The EBIT loss was £0.3 million after £1 million costs incurred in the technical launch of the multibrand Unbound platform and non-recurring PLC costs of £0.15 million.

However, the company has enough cash to continue with its strategy following a successful equity raise of £3.1 million and said the Unbound trading platform rollout is on track with technical delivery and costs complete as scheduled in July, and with partner brands continuing to be onboarded throughout Q3 and Q4.

The company’s Hotter Shoes brand is a popular comfort footwear label among the 55+ age group and the development to sell additional partner brands is part of the firm’s strategy “to position Unbound as the authority voice [for] the 55+ consumer”.

The company said that in the latest period, all channels grew year on year with a notably strong performance in Retail that was up 71.6%. Adjusting for Covid-related closures in FY22, it was up a smaller-but-still-healthy 17%.

It also said that AW22 stock availability for Hotter is at the highest-ever levels for a seasonal launch.

The company added that the “combination of our UK manufacturing facility and strengthened supply chain enabled us to respond to changing consumer behaviour in-season, which has and will continue to benefit our performance in an unpredictable environment”.

It’s clearly expecting some turbulent times due to the cost-of-living crisis and said it has “seen tougher trading conditions in recent weeks [so] the short-term outlook is very challenging to predict, given the volatility of the economic backdrop and resultant impact on consumer confidence”.

But its medium-term growth objectives “remain unchanged and, with growth achieved in H1 despite challenging economic circumstances, we remain confident, but recognise an increased short-term risk”.

Its focus will remain “managing costs, protecting margins and cash flow, ensuring the appropriate levels of working capital and managing capital investment tightly”.

The recent Unbound platform launch should help it as it “will allow for a greater degree of revenue diversification over the medium term, in addition to growing and engaging with our active customer base”.

Unbound expects full-year operating profit before exceptional items to be in a range of zero to a loss of £1 million.

CEO Ian Watson said that against a tough backdrop, “the combination of further growth in sales and gross margins demonstrates the effectiveness of our strategic initiatives and the value that our customers attach to our core Hotter product, giving us confidence despite the market conditions, which have become more challenging in recent weeks”.

To address a tougher market, the company has adapted its product offer and has 17% more styles available within the range. 

“A culture of continual improvement sees the brand striving to establish next generation, comfort hero styles,” it said. “Successful new constructions from [SS22] have been developed with seasonally appropriate styling, adding further breadth and consumer choice”.

The company added that H1 saw a return to normalised product category demand. Seasonal styling outperformed versus its plan and bounced back to pre-pandemic mix levels. So it has “reshaped our AW22 collection to reflect this behavioural change, resulting in style growth of 16% within our boot category, for example”.