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Sosandar: trendy but not made to last

A once-fashionable retailer has lost its sparkle for investors
Sosandar: trendy but not made to last
  • Sales surge but the middle-aged womenswear retailer is still loss-making
  • Sosandar’s target demographic is not ideal for an online-only business
  • With others boosting their e-commerce offering, the company also faces growing competition for clicks

“Fashions fade,” legendary designer Yves Saint Laurent once said. “Style is eternal.”

Investors, who often like to buy into the hottest trends, would do well to bear this in mind. A retail business can cling to the fickle coattails of fashion, but it’s harder to find a unique selling point that ensures it will never go out of style.

Online-only womenswear retailer Sosandar (SOS) listed on Aim in 2017, amid a flurry of excitement about e-commerce companies. Many investors bet the firm, which targets middle-aged shoppers, could capitalise on the growing demand for click-to-buy fashion – its shares nearly tripled in under a year.

But since then, Sosandar’s stock has faltered, as shareholders grew impatient for it to turn a profit. This week the company reported an operating loss of £1m for the six months to September – its best result since listing.

Sosander slashed its sizable spending on marketing during the pandemic, at the same time as its loungewear range received a boost from housebound mums. Revenues climbed 52 per cent on the same period last year, to £4.3m, with a record month in October.

But while the sales direction is up for the business, investors shouldn’t expect it to reach the heights of online fashion giants ASOS (ASC) and Boohoo (BOO), which at the same point in their lifetimes had started making profits.

Sosandar’s blessing and curse is its target market. It’s a modern solution for shoppers who still remember when shoulderpads were in vogue, with a marketing bill swollen by spending on brochures and TV advertising. Its customers’ teenage daughters, meanwhile, see models and friends posting photos of the latest Boohoo gear on Instagram, where the retailer has 7m followers. Sosandar has 54,000.

The company most likely has its sights set on shoppers at John Lewis (JLH) and Next (NXT), who both now sell Sosandar’s own-brand clothing. But this market will take longer to transition online. Although high-street lockdowns this year accelerated the shift to internet shopping – Sosandar saw email sign-ups jump 28 per cent in three months – online purchases still made up less than a fifth of clothing sales in the UK pre-pandemic. 

With Next now making a determined move online, Sosandar may soon face growing competition for clicks. Its journey to date is a reminder that not all internet retailers are made equal, and it doesn’t always pay to buy into the latest trend. Sell at 18p.

Last IC view: Na

SOSANDAR (SOS)   
ORD PRICE:18pMARKET VALUE:£ 35m
TOUCH:18-20p12-MONTH HIGH:31pLOW: 4.5p
DIVIDEND YIELD:0.0%PE RATIO:NA
NET ASSET VALUE: 4pNET CASH:£4.4m
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20192.8-2.9-2.10.0
20204.3-1.1-0.60.0
% change+54---
Ex-div:na   
Payment:na