Footasylum warns over blow from heavy festive discounting
The 70-strong chain said it now expects full-year underlying earnings to be towards the lower end of forecasts.
Retailer Footasylum has warned over pressure on full-year earnings after it slashed prices amid heavy discounting on the high street.
Shares in the chain plunged more than 15% after it said it now expects full-year underlying earnings to be towards the lower end of forecasts, as profit margins were hit by steep discounting over the festive season.
It cautioned that Brexit uncertainty and weakening consumer sentiment were causing “some of the most difficult trading conditions seen in recent years”.
The sports retailer is now cutting costs across the business to offset the knock to profit margins.
But it saw discounting efforts help keep revenues on track for the full year, with the group reporting a 14% rise in total sales over the 18 weeks to December 29, with online up 28% and stores up 5%.
Footasylum executive chairman Barry Bown said: “The short-term outlook is undeniably challenging, and we continue to maintain our focus on cash, working capital and inventory management, as well as reducing costs across our operations.
“The current trading conditions have led to significant discounting and promotional activity across the sector, and this in turn has impacted our gross margin expectations for full-year 2019.”
The festive update comes after Footaslyum said in October that it would slow down its store opening plans after swinging to a £2.5 million pre-tax loss for the 26 weeks to August 25 against profits of £1.7 million profit a year earlier.
The firm’s stock tanked in September after it warned over full-year profits and sales.
Jonathan Pritchard, retail analyst at Liberum, said Footasylum was likely forced to discount after being left with an “unenviable stock position” after poor buying decisions on both footwear and clothing.
He added: “Management is implementing a cost saving programme, which makes sense, but it will be a long time, in our view, before the business generates a profit before tax.”