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Very Group set for £2bn revenues after agile response to peak-level trade during Covid-19 – but falling fashion sales may flatten profits

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The Very Group is on track for full-year revenues of more than £2bn for the first time – thanks to an agile online model that enabled a fast response to peak levels of trade during Covid-19. But growth came in relatively low margin categories, while more profitable fashion sales declined.

The pureplay retail group says its flagship brand Very saw website visits jump by 65% in the final quarter of its year, to June 30, compared with the same time last year, while retail sales grew by 36%. The fastest growth was in electricals (+78%) and homewares (+53%), with gaming, vision, computing, garden tools and DIY and small domestic appliances its best-performing departments. The significant decline in fashion sales, which are relatively high margin, meant however that profitability is likely to be similar to last year.  

The group says it grew its share of the non-food market by 1% in the final quarter. Full-year growth was more than 10% ahead of last year, and group retail sales, including Littlewoods and Littlewoods Ireland, grew by 28% in the fourth quarter on the previous year, anew customer numbers grew by more than 100% in the final quarter of the year. 

The retailer now expects underlying full-year earnings before interest, tax and asset write downs (EBITDA) to come in at between £255m and £270m. Last year the retailer reported EBITDA of £271m.

Logistical improvements

On the same day – March 23 – that non-essential retailers closed their shops for Covid-19 lockdown, Very Group opened its new fulfilment centre, with 850,000 sq ft of automated warehousing space – which processed its millionth outbound order in July. Products can now go from order to dispatch within 30 minutes and the centre offers later cut-offs for next day delivery as well as the potential for same-day delivery. It has helped the retailer to handle periods where demand has been equivalent to peak trading.

During lockdown, 800 contact centre staff and more than 1,000 head office staff worked from home. No-one was furloughed. 

Henry Birch, chief executive of The Very Group, said the group had “delivered an uninterrupted service for new and existing customers, who chose us as their preferred shopping destination during lockdown.”

He added: “As in the financial crisis, our business model proved adaptable and resilient in the face of volatile conditions and changing consumer buying patterns. We experienced peak levels of trading and recruited unprecedented levels of new customers as our online multi-category model supported by financial services came to the fore.

“Despite operational challenges caused by Covid, we adapted and pressed on with the migration to our Skygate fulfilment centre, which will create game changing new benefits for our customers and our business.

“Economic conditions will continue to be challenging, but we believe we are more relevant than ever for customers, who are increasingly buying online. We are well positioned to continue the strong trading into the new financial year and will continue to invest to ensure we are at the forefront of whatever the new normal may be.”

The Very Group says that 79% of the 1.5m website visits it receives every day are completed on mobile devices. The retail group sells a range of 1,900 brands, including its own exclusive labels, to four million customers a year. 

Commenting, Alex Hardy, retail analyst at data and analytics company GlobalData, said Very Group’s credit proposition helped to grow new customer numbers as it offered flexible payment options at a time of economic uncertainty.

Hardy added: “While The Very Group was well-positioned to flourish during lockdown, swift and decisive action ensured it achieved profitability. Stress testing led to measures such as cost reduction, inventory control and tight management of capital spend. Combined with increased sales, these cost cuts have helped to boost EBITDA, which is forecast to reach £255-270m in FY2019/20. The group will finish the year with over £200m in cash, which not only provides long-term security, but also scope for expansion or investments.”

Very is a Top50 retailer in RXUK Top500 research, while Littlewoods is ranked Top100.

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