Best & Less (ASX:BST) share price slides despite record profit

Despite the company not even having been listed at the end of financial year 2021, its share price slipped on its results.
The post Best & Less (ASX:BST) share price slides despite record profit appeared first on The Motley Fool Australia. –

Best & Less Group Holdings Ltd (ASX: BST) shares slipped today after the ASX-newbie released its results for the 2021 financial year (FY21).

At close, the Best & Less share price finished at $2.75, 3% lower than yesterday’s closing price.

Best & Less share price slumps despite 190% profit boost

Investors drove the Best & Less share price lower in spite of the clothing retailer reporting the following key highlights from its FY21 performance:

$663.2 million of revenue, 6% more than that of FY20.
Net profit after tax of $47 million, up 191%.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $71.6 million – up 165%.

Best & Less beat its prospectus forecasts across all key metrics in FY21.

It saw a gross profit of $279.3 million.

The company ended the period with $35.7 million of cash and received $14.1 million of JobKeeper over the period.

What happened in FY21 for Best & Less?

If you’re keen to know how the Best & Less share price performed during FY21, you may be disappointed. That’s because the Best & Less initial public offering (IPO) occurred after the financial year’s end. Those interested can read all about the company’s ASX debut here.

During FY21, Best & Less aimed to boost its online sales and its strategy appeared to pay off.

The company’s online sales grew by 33.5% in FY21, representing 9.2% of all sales. The increased online sales came after Best & Less introduced click-and-collect and ship-from-store facilities.

Additionally, the company sold nearly 90 million units in FY21.

Best & Less’ loyalty programs grew by over 400,0000 members in FY21. The company’s loyalty programs had around 1.7 million members as of June 30, 2021.

Best & Less also opened 2 new stores, relocated 6 stores, and closed 7 stores. It ended the period with 245 stores.

The company also published its first modern slavery statement during FY21 and made progress on its living wage commitments. During the period, Best & Less conducted 217 factory audits to ensure compliance across its supplier base.

It also initiated a workers grievance hotline to protect those employed in its suppliers’ factories and provide them with a voice directly to the company.

The company also supported 173 different charities through Good360 and partnered with Drought Angels.

What did management say?

Best & Less’ CEO Rodney Orrock commented on the results driving the company’s share price lower today, saying:

Delivering a record profit and exceeding our Prospectus forecasts in all key metrics, with EBITDA and NPAT ahead 18.0% and 18.1% respectively, is an endorsement of our strategy, leadership in the value retail apparel segment, particularly baby and kids’ categories and our omnichannel sales model.

Our strong like-for-like sales growth of 10.8% in FY21 reflects the success of our differentiated customer value proposition of ‘twice the quality at half the price’. The robust performance of our core categories, including baby which grew by over 15%, as well as underwear and sleepwear, further highlights the defensive characteristics of our business…

In this challenging environment the deep retail sector experience of our management team pays off, enabling us to respond effectively to rapidly changing conditions. I would like to thank all of our team members for their commitment to providing excellent service, our suppliers for their support during a challenging period and our customers for their continued loyalty.

What’s next for Best & Less?

Here’s what investors keeping an eye on the Best & Less share price need to know:

The company has been hit hard with COVID-19 restrictions since the end of FY21, with approximately 19.9% of Best & Less’ potential trading days being lost due to government-mandated closures. Additionally, stores allowed to remain open have seen reduced foot traffic.

Between 30 June and 22 August, the company’s total sales are down 25.7%.

However, over the same period, the company’s online sales have grown by 6.8% from FY20 and by 107.5% against the same period 2 years ago.

44 of the company’s NSW stores opened again yesterday, in line with government restrictions.

Still, to accommodate lost income, Best & Less is undergoing a capital and hiring freeze and its senior management team has voluntarily reduced their salaries by 20% until the end of lockdowns.

The company is also negotiating with its landlords to “appropriately share the burden of the mandated store closures”.

Despite the current struggles, Best & Less expects to achieve its prospectus’ EBITDA and net profit after tax forecasts for the 2021 calendar year. These are $62.4 million and $41.3 million respectively.

Best & Less share price snapshot

Since Best & Less listed on the ASX, its share price has gained 15%. Its shares are also going for 27% more than its prospectus’ offer price of $2.16 apiece.

The post Best & Less (ASX:BST) share price slides despite record profit appeared first on The Motley Fool Australia.

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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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