Specialty Fashion returns to profit, expands online sales

Specialty Fashion Group (ASX: SFH), the largest specialty retailer of women’s fashion in Australasia, through Millers, Katies, Crossroads, Autograph, and City Chic stores, released its 2013 full year report, announcing a return to profit of $12.97 million after last year’s $2.81 million loss. Revenue was down by a mere 0.5% to $569.5 million, reflecting the dull retail market currently.

The report states that the result has been achieved from reduced product cost prices and reduced freight costs, which are the outcome of the investments made in transforming the Group’s supply chain to a design and direct sourcing model.

The Group also reaped the benefits of the decrease in cotton prices as reflected in fabric costs, and a more favourable average USD exchange rate of $1.01 for the year.

It has one of the largest women’s customer communities in Australasia with over 7 million members, and can reach over 2.8 million members through email. Member sales represented over 80% of overall sales.

In July 2013, it was awarded “Australian Multichannel Retailer of the Year 2013” by the Australian Retailers Association in recognition of the Group’s omni-channel operations. It is developing a CRM platform for each brand, investing in an expanded pick and pack facility and personalised email marketing. This has continued to deliver results in customer engagement.

Looking forward, the company will continue its focus on their omnichannel strategies, customer relationship management and the supply chain.

One change was the exiting of the licence for La Senza stores in Australia. The company said, “The seasonal and demographic complexities of the La Senza product being developed for the North American market did not translate and proved challenging in the Australian market.”

The agreement with the La Senza Corporation meant that there were no penalties for cancelling the licence and the financial impact of La Senza to the Group’s earnings was not significant. Store assets were assessed for impairment and written off where appropriate.

As of the 30 June balance date, the company operated 886 stores nationwide and in New Zealand. It opened 40 new stores, and closed 47. Of those closed, 18 stores related to the La Senza brand.

The Group reported that it remains very cautious of organic growth that may be achieved at the current time due to the lack of consumer confidence in Australia presently.

Foolish takeaway

The first green shoots of a recovery are slow and don’t seem like much, but if you wait to act until you see an overall major uptrend, the bargains will have escaped. Buy wisely when there is still gloom in the market.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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