'Great outcome': Best & Less (ASX:BST) share price rockets 9% on maiden dividend

Here's what's driving the Best & Less share price today.

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Key points

  • The Best & Less share price launched 9% today to trade at $3.68
  • Its gains followed the release of the company's earnings for the first half of financial year 2022
  • Over the half, the retailer suffered through the loss of 9,437 trading days to come out in line with its prospectus' profit forecasts for calendar year 2021  

The Best & Less Group Holdings Ltd (ASX: BST) share price is in the green after the company released its earnings for the first half of financial year 2022.

At the time of writing, the Best & Less share price is $3.68, 8.88% higher than its previous close.

Best & Less share price surges on half year earnings

Best & Less delivered what the company described as a "robust" performance over the first half, despite losing 9,437 trading days – representing 21.3% of total trading days – due to COVID-19 lockdowns and restrictions.

While the company's revenue fell, its like-for-like sales increased 0.1% and its online sales were boosted 24%.  

Additionally, its gross profit margin recorded a 210-basis points improvement, reaching 50.8%. Meanwhile, its EBITDA margin was strong at 10.6%.

Best & Less' pro forma operating cash flow came to $16.4 million. Its net cash position at the end of the half was $31.1 million.

Finally, it has announced its maiden 11 cent dividend in line with its policy to pay out 60% to 80% of NPAT.

What else happened during the half?

As COVID-19 outbreaks raged, Best & Less' stores struggled with lower foot traffic ahead of the peak December holiday trading period.

In response, the company right sized and moved inventory to offset the impact of sales fall out from lost trading days.

It also lowered its cost of doing business by 7% compared to that of the prior comparable period.

On top of that, it onboarded more than 500 new staff, opened 2 new stores, and renewed 41 leases last half.

The company also successfully trialled baby non-apparel lines and launched its Product Lifecycle Management (PLM) system.

What did management say?

Best & Less CEO, Rodney Orrock commented on the company's first half results, saying:

To have achieved our [calendar year 2021] prospectus profit forecasts is a great outcome in challenging conditions and is the result of a relentless focus on managing gross margin and costs across the business.

Our omni-channel model continues to provide us with flexibility and our ongoing investment in online is paying off, with online sales rising significantly and conversion rates continuing to improve. We have managed our supply chain and inventory well and are in a strong position heading into the second half as trading conditions strengthen.

What's next?

Best & Less has declined to give guidance for the remainder of financial year 2022, citing ongoing market uncertainty.

However, it did look back at the first 8 weeks of 2022 and forward at its strategies for the near future.

Over the first 8 weeks of the second half, the company's total sales were down 7.6% on those of the second half of financial year 2021.

Though, January and February are normally the retailer's quietest months of the half.

The Omicron outbreak impacted traffic and purchasing behaviour in January, as did delays to the restart of school.

The company expects such impacts will lessen this month and continue improving through the remainder of the financial year.

With a strong inventory position and supply chain, it's ready to trade through the busy Easter and Mother's Day periods.

It will look to grow its market share in baby and kids clothing and its store numbers in the current half. It's also working to improve its womenswear offerings and its online capabilities.

Best & Less is aiming to hold its operating profit margin amid the inflationary environment, supply chain challenges, and workforce pressures.

Best & Less share price snapshot

2022 hasn't been good to the Best & Less share price.

Today's gains included, it has fallen 11% since the start of the year. Though, it's still 53% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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