The Very Group has seen a small dip in sales but a large increase in profits in the first half of its financial year, a year after the Covid-19 pandemic closed UK non-essential shops, pushing shoppers online. The online department store business says that customer spending habits are now shifting away from the home living and home working products that helped shoppers through lockdowns. Instead, interest is growing in fashion and sports.
The Very Group also says that it is continuing to benefit from its automated fulfilment and returns centre at East Midlands Gateway, with labour costs per unit now lower than its previous distribution model. It says that distribution costs before one-off expenses fell by £6.1m to £122.3m, and fell to 9.9% of revenue from 10.2% previously. That has helped to boost profits in the first half of its year.
The update comes as The Very Group publishes a second quarter report that shows revenues of £1.23bn in the six months to January 1 2022. That’s down by 1.9% from revenues of £1.255bn a year earlier. Revenue at its Very flagship brand grew by 1.3m to £1.03bn on last year, and 17.2% on two years ago. Revenue at secondary brand Littlewoods continued to decline. It came in at £204.8m, 15.3% down on the same time last year, and 21.9% down on two years ago. Retail sales fell by 2.9%, while the Very brand grew retail sales by 0.2%
Pre-tax profits came in at £71.6m before one-off costs of £13.7m, which took it to a pre-tax profit of £57.9m. That’s 141.3% up from a bottom line pre-tax profit of £24m a year earlier. As well as cutting distribution costs, profits also grew as the group invested in improving its credit decision making process and reduced its bad debt rate to 3.1% from 3.7% a year earlier, and as it reduced its administrative expenses to 12.5% of revenue from 13.6% a year earlier.
Commenting on the figures, Kunaal Shah, GlobalData retail analyst, says The Very Group was always going to struggle to outperform in comparison with last year, but that its two-year results fell short of those posted by other online specialists. “While ASOS saw two-year revenue growth of 29.6% in the four months to end of December 2021, the Very Group only grew 10.0% in H1 FY2021/22 versus H1 FY2019/20.”
Shah points to performance driven by The Very Group’s fashion and sports category, which grew by 14.3% on the same period two years earlier, and its developing categories (+10.2%), which include toys and beauty. Shah adds: “The retailer must now ensure it shifts its focus across all categories to create an assortment that caters to consumers post-pandemic habits, including growing its beauty and wellbeing offer.”
Very is a Top100 retailer in RXUK Top500 research.
