The Shaver Shop Group Ltd (ASX: SSG) is under the spotlight as it unveiled a big increase in earnings but warned of softer sales.
The desperate rolling COVID-19 lockdowns are both a friend and foe for the personal grooming retailer.
The group posted a 68.3% surge in FY21 net profit to $17.5 million as sales improved 9.6% over the previous year to $213.7 million.
Shaver Shop profit and margin expands
What may be particularly pleasing was a large expansion in profit margins. Gross profit margin expanded 240 basis points, or 2.4 percentage points to 44.3%.
In a period when so many ASX companies are complaining about cost pressures, Shaver Shop is flexing its muscles.
One big contributor to the improved margins is cost control. Management shaved 110 basis points off operating expenses to 25.8% of sales in the period.
Shaving costs helped with strong result
"Shaver Shop worked proactively and collaboratively with landlords during lockdown periods," said the company.
"In doing so, Shaver Shop received $0.8m in rent abatements in FY2021 for stores that were significantly impacted by government-imposed trading restrictions due to COVID-19."B
Perhaps the comments were meant to contrast with the more confrontational approach some retailers, such as Premier Investments Limited (ASX: PMV), have taken with landlords.
Shaver Shop profit results boost dividends over 70%
The retailer also credited its astute management of store rosters during the long COVID lockdowns. This resulted in employment cost savings during the year.
Shaver Shop is using some of the stronger profit and margins to reward shareholders. It declared a fully franked final dividend of 5 cents a share, which takes total dividends for the year to 8.2 cents. That's a 71% increase over FY20's total dividends.
Has Shaver Shop's sales peaked?
But management's outlook could be the chink in the armour as it suggests its revenues may have peaked.
Shaver Shop reported that total sales since the start of this financial year is 7.3% below that of the same period in FY21.
The retailer blamed the long painful lockdowns in Victoria and New South Wales for the drop. Interestingly, Shaver Shop was seen as a COVID winner during the earlier COVID outbreak as more stuck-at-home consumers had to turn to DIY grooming.
Foolish takeaway
The latest round of lockdowns is driving a big surge in Shaver Shop's online sales, but that's not enough to offset the losses.
Website sales has jumped 52% since the start of FY22 over the same time last year and is up 368.1% versus FY20.
Given that the Shaver Shop share price is "only" up 13% over the past year, maybe investors will be happy to overlook the negatives.
