nelly.com owner Nelly Group today reports falling sales and a bottom line loss in a fourth quarter and a year marked by growing inflation, consumer anxiety and pressure to reduce prices.
The Swedish online fashion retailer says that footfall fell throughout the year, and it took the decision to cut prices in order to sell autumn and winter stock, with an impact on profit margins. It has taken the decision to issue new shares to improve its working capital to the tune of around SEK 50m (£3.9m), subject to shareholder approval at an extraordinary general meeting. It is also continuing a transformation plan targeting a return to profitability.
The update comes as Nelly today reports net revenues of SEK 387.2m (£30.5m) in the fourth quarter of 2022. That’s 4.9% down on the previous year. It reported an operating loss of SEK 1.8m (-£0.14m), and a pre-tax loss of SEK 6.6m (-£0.48m).
In the full year to December 2022, it reports net revenues of SEK 1.3bn (£102.3m), an operating loss of SEK 56.1m (-£4.4m) and pre-tax loss of SEK 71.6m (-£5.6m).
Acting Nelly Group chief executive Helena Karlinder-Östlundh says: “We can see that the conditions are now starting to fall into place for a return to profitability during the year by offering our customers an attractive range at the right price point with more appropriate, sustainable expenses.”
The retailer says it is now seeing the early positive effects of a transformation programme it launched in 2022 in order to boost profitability. Results include lower operating costs in areas from marketing – where it has prioritised organic traffic and reduced spending on paid. It has reduced warehousing costs to 14.7% of net revenues in the fourth quarter from 16% a year earlier, and says it has more efficient logistics operations, which include a high capacity automated warehouse, as a result. It has cut administration costs – largely reflecting lower payroll costs following the launch of a third-quarter cost reduction programme.
Returns rates improved in the third and fourth quarters – when they stood at 32%, down from 35.1% a year earlier – after the retailer focused on selling everyday clothing alongside party wear. Nelly now aims to encourage shoppers to buy more frequently, while consolidating its customer relationships.
Nelly was founded in Borås, Sweden, in 2004 and has expanded by using influencer marketing and selling to customers online in a mature digital market. Today it has 2.4m members in the Nordic region, and 1.1m active customers.
nelly.com is ranked Top50 in RXUK Top500 research, reflecting its reach and performance in the UK market. The retailer also operates a menswear website, NLY Man.