Half yearly is out, and the headline numbers look decent.
Breaking it down: Australia showed strong growth, the UK was okay but impacted by the cost of living (or at least that’s the given reason), and the US declined as ad economics didn’t stack up, leading them to pull marketing spend.
I had a few gripes with the presentation pack presented. There was a $1m foreign exchange gain made ($1.5m swing vs pcp) - adjusting for this, EBITDA and NPAT would actually be slightly down vs pcp. This fact wasn’t particularly highlight as they boasted about revenue and profit growth.
The presentation also omitted some stats from previous years, such as new/returning customer split (can be back-solved), order numbers by region, and %revenue done via sales events. I assume none of these numbers paint the company in the favourable light, so they were dropped.
Overall, it’s a thesis break for me. While Australia growth is okay, international is stalling. Growth looks increasingly low-quality - driven by discounting especially with larger bulk sized orders. While the customer base has largely stagnated. Here are some graphs to highlight my point.
I had already cut my position substantially leading up to the report and fully exited this morning. I’ll do the same with the SM portfolio position.
An update was out this morning. I was expecting Revenue/PBT for 2H to be $36.3m/$5.8m (assuming PBT margins matched pcp of 16%) and it's coming in at around $39m/$7.2m. So revenue and PBT a bit better than my expectations in a seasonally weaker half.
The full year results will be interesting. In particular on the commentary around its expansion in the UK and the US. Shipping into the US increased dramatically in the past 6 months, and this should be a leading indicator that they're doing quite well there.
(sourced from import genius)
PS: The undies are on special on Amazon right now during its Prime Day sale. I've taken the opportunity to upgrade my threadbare ones.
This is an interesting one. Reported half yearly results today. Hit record revenues and profits (+25%, +38% respectively vs pcp) surpassing the numbers reached during the height of the pandemic. One of the very few ecommerce retailers to do so!
Seems to have got the results by doing upsell promotions; by getting customers to buy more in a single order. As a result, average order size and the items per order have both increased, while the revenue per order decreased. So pushing more volume, for slightly lower prices. But margins have remained high, so the strategy is working.
A pleasing aspect of the result has been the performance of the UK and US divisions up 38% and 256% (tiny base) respectively. UK’s average order size has been moving towards that of Australia’s. While the US’s return customer metric has been improving and is now well above 40%. This will be the true upside for the company should they get those geographies rolling.
I like the candour of the management team. During the conference call, they mentioned that customer acquisition costs (CAC) is not solely about acquiring new customers. There is no way of attributing cost to new or returning customers. Which is the absolute truth - returning customers will still click on Google Ads! I haven’t heard of any ecommerce companies describe it like this.
One area to watch I touched on last time is the inventory levels. They’ve been able to run this down substantially in this half, and is consolidating the range of products. So a tick there.
At $1.40, it’s on a EV/E of 19 and pay around a 4.2% fully franked dividend.