Only three months on from a lacklustre set of half-year numbers, Footasylum (FOOT) has disappointed investors yet again. The sportswear retailer has admitted that, due to prolonged promotional activity and heavy discounting, gross margins won’t meet the 43.3 per cent consensus forecast. Analysts at Liberum have taken their forecast figure down from 43 per cent to 42.5 per cent for the year ending February 2019.
That puts group sales – up 14 per cent over the 18 weeks ended 30 December 2018 – into sharp contrast by suggesting this rate of growth is only achieved by slashing prices. Brokerage Peel Hunt said that although it expected to see a 100 basis point squeeze in second-half gross margins, this contraction could now be closer to 300 basis points, leaving "quite a dent" in gross profit. Analysts there described Footasylum’s stock position as "unenviable" following "some injudicious buying decisions on both footwear and apparel".
While Peel Hunt took its cash profit forecast down by a fifth only recently, it says even the new numbers will be "difficult to hold", adding that the cost-cutting strategy must be implemented “very quickly” if it’s to boost profitability.
