Seraphine lowers full year profit expectations despite rise in sales
International maternity brand Seraphine has issued a profit warning today, despite the company seeing a 45% sales growth in the 17 weeks to 30 January 2022.
Seraphine noted that February had so far been a soft month across all markets and channels, with the retail store store trading environment remaining extremely challenging. The company confirmed it expects e-commerce demand to recover in March with the launch of the spring/summer collection to boost demand.
The brand added there have been a number of margin and costs challenges recently identified resulting in FY22 EBITDA being significantly below current expectations at approximately £4.5m.
Challenges included an underestimation of sales tax and duties in its new markets Canada and Switzerland, higher promotional activity at the end of December and in January to clear an increased mix of seasonal product, delayed stock issues in the summer and an inflation in warehousing and transport costs.
To save costs and mitigate margin erosion Seraphine announced that it had decided to close its Madison Avenue retail store in New York and change the lease of its Soho store. Further mitigating actions included eliminating duty charges on customer returns from non-EU markets via bonded warehousing, making changes to its tax collection procedure in Canada and negotiating a new long-term agreements with its third-party logistics suppliers.
Seraphine said these actions were expected to have a positive impact during the full year 2023 and that it expected sales to grow by 25-30% and EBITDA margins to recover.
The maternity brand was founded in 2002 with the aim of designing clothes for women throughout their pregnancy and beyond. The company's rapidly growing digital platform contributed approximately 89% of revenue in the year to 4 April 2021, with the group exporting products to customers in over 120 countries globally, with its largest markets being Europe, North America and the UK.