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Earnings climb at Shop Direct on flat sales as newest brands deliver

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Online shopping company Shop Direct has reported improved annual earnings on flat sales, and trading up in some key categories.

Unaudited accounts show Shop Direct’s EBITDA was up 36% year on year to £125m on sales flat at £1.7bn in the year to the end of June. At pre-tax level profit is likely to be “negative”, reflecting exceptionals, said chief executive Mark Newton-Jones.

Newton-Jones, talking to Retail Week, said Shop Direct’s performance last year reflected tighter credit scoring of customers in tough economic conditions and outperformance by its newest brands, such as Very and Isme, compared with its traditional businesses such as Littlewoods and Kay’s.

Newton-Jones said he was delighted with the performance because the retailer had planned for sales to fall 5% as shoppers’ discretionary spend continued to come under pressure. “The picture is we’ve managed stock really tightly,” he said. “We went into our sales period with 50% less stock than last year and that helped margins.

“We’ve taken significant costs out and some of that will have a positive impact in the year ahead.”

Very was up 33% last year and Isme by 46%, while Littlewoods and Kay’s, where tightening of credit terms has been most felt, were down about 9% between them.

Over the year, group clothing and footwear sales fell 6%, furniture and homewares fell 4% and electricals and seasonal was up 4%.

This final category has performed strongly since the year-end, with sales up 10% in the nine weeks to July 21. Tumble-dryer sales spiked, for example, as consumers were unable to hang out washing during the wet weather.

Online sales now account for 75% of the group’s sterling turnover, and mobile shopping now accounts for 12% of total sales. “I think it will easily get past 50% in the next three years,” said Newton-Jones.

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