Shares in Seraphine (BUMP) slumped 31% to 188p after the posh maternity-to-nursing wear brand warned first half sales growth and full year profits will disappoint, pinning the blame for a recent growth slowdown on supply chain issues which impacted product availability and halted positive sales momentum.
While Seraphine experienced a strong first quarter to 4 July with year-on-year sales growth north of 50%, trading in the second quarter has been ‘more challenging than the board anticipated’.
SUPPLY CHAIN PAIN
In a disappointing maiden update following its main market debut at an issue price of 295p in July, the digitally-led maternity clothing company explained supply constraints impacted stock availability across the second quarter.
This weighed on new customer acquisition, diluted Seraphine’s marketing spend and caused revenue growth to slow through the quarter.
Seraphine was unable to fully satisfy customer demand and experienced ‘a loss of momentum on its own digital platform as it exited the summer months, capturing fewer customers at the beginning of their maternity cycle’.
In the year to 4 April 2021, Seraphine’s fast-growing online platform contributed almost 90% of sales and the company insisted digital partnerships with the likes of Zalando are ‘performing well’, although ‘the physical retail environment remains challenging’ for its eight bricks-and-mortar stores.
As a result, Seraphine is now guiding to slower than anticipated first half sales growth of 35% with adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of around £2.5 million, a 15% drop year-on-year.
Though stock issues have been ‘fully resolved’, should recent trends persist, Seraphine expects full year revenue growth to be ‘at least in line’ with the first half and annual profit on an adjusted EBITDA basis to be at least flat year-on-year.
EXTREME DISAPPOINTMENT
CEO David N Williams commented: ‘After a strong Q1 exceeding expectations with group revenue growth of over 50%, it is extremely disappointing to have to report a weaker Q2 performance due to the significant impact of logistical headwinds and the subsequent momentum loss.’
Nevertheless, he added ‘the actions we are taking are the right ones to ensure an improved second half performance and I remain fully confident in the future prospects for Seraphine.’
‘This is doubtless a challenging update’, said Numis Securities’ Deirdre Mullaney, ‘reflective of some of the difficulties facing the sector at the moment, which we expect are harder for smaller brands and retailers to mitigate.’
Downgrading her target price from 330p to 300p on the news, Mullaney lowered her full year 2022 EBITDA estimate from £7.6 million to £6.2 million and her pre-tax profit forecast from £6.7 million to £5.3 million.
‘Given the nature of the current challenges, our outer year forecasts are rebased more modestly, but we reduce full year 2023 and outer year EBITDA estimates by circa 12%’, said the analyst.
