Bonmarche maintains dividend despite lower store sales shredding profits in half
Retailer Bonmarche laid bare its high street struggles today after a recent profit warning, revealing that store sales fell in the first six months to the end of September despite a boost to online income.
The figures
Revenue came in flat in its half-year results compared to the same period last year at £97.9m. In-store like-for-like sales dropped four per cent year on year, though online sales increased by 29 per cent to account for 12 per cent of total sales, up from nine per cent last year.
However, profit before tax almost halved to £2.3m compared to £4.2m in Bonmarche’s half-year results in 2017, while basic earnings per share were slashed from 6.8p last year to just 3.3p.
Bonmarche’s cash flow fell by £5m to £9.6m but it kept its interim dividend steady at 2.5p per share.
Why it’s interesting
The results come just two months after Bonmarche issued a profit warning in September, sending its share price crashing by 20 per cent.
At the time the retailer blamed lower footfall and weak high street demand, factors that are still weighing down its results.
However, while Bonmarche is trying to improve its digital proposition, it said that despite stores experiencing “challenges”, almost all remain profitable.
The company is also taking advantage of short lease terms to offer flexibility over the number of stores it has open, and remains confident enough to pay shareholders a dividend.
But the company said it is reliant on sales meeting expectations between Black Friday and Christmas in order to maintain adjusted full-year guidance of £5.5m underlying profit before tax.
Kate Heseltine, analyst at Edison Investment Research, said Bonmarche is prioritising diversifying its sales base, by securing an average rent reduction of 15 per cent on stores and boosting online sales.
However, she added that there is "much hinging on" achieving Black Friday and Christmas period sales goals.
Mark Photiades, director of general retail research at Cantor Fitzgerald Europe, maintained a 'buy' rating on the retailer, saying: "We take encouragement from the fact that good growth continues online as the customer proposition continues to improve and the new ranges resonate."
What Bonmarche said
Helen Connolly, chief executive of Bonmarche, said:
Whilst store trading has been impacted by the general weaker consumer sentiment and footfall seen across the market, we have continued to improve our proposition, particularly our digital capabilities and with a broader, modernised product offer, which is reflected in our strong online performance. We remain focused on exploiting the opportunity afforded by the increasing demand for online shopping, and are encouraged by customers' responses to new ranges such as denim, leisurewear and resortwear.
Despite the challenging market, the health and fundamentals of the business remain strong and the board remains confident in the strategy and in Bonmarche's long-term prospects. Accordingly, the board has declared an interim dividend of 2.5p per ordinary share, in line with last year's interim dividend. The board's intention at this time is that the total dividend in respect of FY19 will be maintained at 7.75p per share, in line with FY18.