Seraphine shares fall by over 60% on back of profit warning

The retailer has warned that profits would be "significantly below" market expectations
// Seraphine shares collapse on the back of warning that profits would be “significantly below” market expectations
// Trading across all stores remained “extremely challenging”

Seraphine has reported that its share price has more than halved after cutting its full year earnings target due to a combination of challenges.

The maternity and nursing wear retailer has warned that profits would be “significantly below” market expectations after shares collapsed by 64%.

The company recorded a strong sales growth in the 17 weeks to 30 January 2022 of 45%, but warned that February had been “soft across all markets and channels”, with retail store trading still “extremely challenging”.

READ MORE: Seraphine appoints Lee Williams as chief financial officer

The board expects online demand to recover in March, which is traditionally a stronger month due to the launch of the spring summer collection, and to deliver full year revenue marginally below current expectations.

In addition, there have been a number of margin and costs challenges recently identified which means that FY22 Adjusted EBITDA pre-IFRS 16 is now expected to be significantly below current expectations at circa £4.5 million.

These challenges include customer acquisition costs impacted in February by weaker demand, an underestimation of the level of sales tax and duties incurred on outbound and returned goods in new markets of Canada and Switzerland, inflation in warehousing and transport costs, and higher than anticipated promotional activity at the end of December.

The board is taking action to mitigate the above margin and cost challenges by eliminating duty charges on customer returns from non-EU markets via bonded warehousing, and negotiation of a new long-term agreement with our third-party logistics supplier.

The group said it is not experiencing issues with inbound stock, with the mitigating actions taken by management since the summer resulting in the on time delivery of the spring summer collection.

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