Newly-listed sports retailer Footasylum has seen its value nearly halved as shares plunged on Monday. After difficult trading this summer, the “athleisure” brand blamed weak consumer sentiment and warned that the next financial year would see more modest annual earnings.
Another High Street Casualty?
The retailer said that there was no chance of recovery on the high street, but outlined plans to make improvements to its website and invest in new store openings, as well as the expansion of their current stores.
The brand offers on-trend sports fashion, stocking brands such as Nike, Adidas and Calvin Klein, as well as own-brand products, and was founded in 2005 by David Makin and John Wardle, previously of JD Sports.
The announcement came as a surprise to many – since floating on the market in November 2017, Footasylum results have been solid, reporting an 18.5% rise in sales and underlying pre-tax profits of £8.4 million for the year to February 2018.
Weak Consumer Sentiment
However, Clare Nesbitt, Chief Executive, said: ‘While our core target market of the 16 to 24-year-old consumer has proved to be comparatively resilient in a downturn, our trading since the beginning of the new financial year has undoubtedly been impacted by the widely-documented weak consumer sentiment on the high street.’
Footasylum also blamed the opening of new stores being hit by “unforeseen delays”, and clearing activity having an impact on profit margins.
Shares have plunged to 40p, leaving the company valued at about £42m. Much of the company’s valuation was based on its ability to grow substantially, so the hope is that the peak Christmas trading season will see it recover.
Analysts Rating Chopped
Despite this possible silver lining, Liberum has slashed its profit forecast by 22% for the year through to February 2019, bringing its previous estimate of £9.6 million down to £7.5 million.
Liberum analyst Wayne Brown stated: “Footasylum remains a high growth business, is investing wisely and the story remains very much intact, though it is clearly disappointing to be cutting numbers by 25%.”
Analysts at Peel Hunt took a more pessimistic view, raising concerns over longer-term issues such as Footasylum’s relationship with key sports brands and the trend for manufacturers to cut out the middleman and go straight to the consumer. Only time will tell if Footasylum can survive the current high street woes.