The Best & Less Group Holdings Ltd (ASX: BST) share price dropped today after the business provided a trading update.
Best and Less is a national apparel retailer with a focus on providing affordable products.
FY22 trading update
The company noted that it gave a trading update a couple of months ago when it released its FY21 result.
However, COVID-19 related disruptions including lockdowns and government mandated closures have continued to impact the company’s trading.
Best & Less noted that it has lost 9,272 trading days so far in FY22, which is equivalent to more than a quarter of the total trading days. This level of disruption has exceeded the company’s previous expectations. It thought disruption would only last to the end of the first quarter in FY22.
Whilst restrictions have eased, the retailer said that customer shopping behaviour has continued to be cautious.
But, it is seeing a bounce back in activity with all of its stores now open. The company noted that the peak trading of Black Friday and Christmas is now approaching.
Positive numbers
Management said that for the 12 weeks from 23 August 2021 to 14 November 2021, the company saw strong like for like sales with growth of 5.6% year on year and 23.8% compared to FY20.
Online sales were up 34.9% on FY21 and 147.2% on FY20.
However, total like for like sales were down 1.3% year on year, but up 13.8% on FY20.
The gross profit margin remains ahead of its prospectus forecast. Best & Less said it is closely managing its inventory, operating costs and cashflow.
Its continued investment into its online business has helped drive its active loyalty club members to around 1.8 million, with increasing customer conversion due to improved customer experience and the introduction of contactless click and collect.
Won’t meet some targets
Best & Less said that with only six weeks left of the FY22 first half, it doesn’t expect to meet its pro forma forecasts for the revenue, EBITDA (EBITDA explained
) and net profit after tax (NPAT).
But it does expect to reach its prospectus forecasts for the 2021 calendar year for pro forma EBITDA and net profit of $62.4 million and $41.3 million respectively. However, even that guidance is subject to there being no more events impacting customer shopping behaviour.
Despite that, Best and Less said that it had a healthy stock position heading into the peak trading period and it’s also committed to a dividend payout ratio of 60% to 80% of statutory net profit.
Summary thoughts on the Best and Less share price
It’s no surprise to see that a retailer with stores closed isn’t performing as well as hoped. I think Best and Less could be a good performer over time, so I’m willing to look past short-term problems.
However, there may be other ASX growth shares with even more long-term growth potential.
