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Far from Best and much Less for iconic retailer

Discount apparel retailer Best & Less (ASX:BST) warned at its November annual meeting that its sales were not doing well in the early months of 2022-23, even though they forecast a solid finish to the half year.

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That saw the shares slide 13% in a day from the most recent peak of $2.70.

In an update this week, the directors’ warning from two months ago became fact – and the shares fell another 6%, dropping under $2 a share to end at $1.97.

Directors told the ASX that weaker than expected consumer demand and pressure on margins have led to the company expecting a decline in half-year profit for the six months to December.

The company told investors on Wednesday it has seen a 13.4% jump in total sales for the first half the financial year to $324.8 million, but online sales dropped by 29.8%.

Other retailers have seen a similar split – solid bricks and mortar sales growth as shoppers went out with the ending of the pandemic lockdowns and a drop in online performance because fewer people were at home ordering products.

Even successful retailers like JB Hi Fi, Super Retail and Myer reported similar experiences except their bricks and mortar sales were either stronger or costs and stock levels were contained.

For some retailers, especially those in the consumer rich eastern states, the cool Spring and Summer conditions because of La Nina, haven’t helped sales growth either.

Best and Less said that while trading was strong over the Black Friday and Christmas periods, “this momentum was insufficient to fully offset the impact of delayed summer weather and supply chain delays”.

Best & Less is now expecting to report a net profit of $13.7 million for the half – down 31% from a year ago.

The group said it would open six new stores in the coming months and was working to implement cost-saving initiatives to match the current trading environment.

“While we are cautious on the near-term macroeconomic outlook, our vertical model and the deep retail sector experience of our team gives us the ability to respond and adapt rapidly,” chair Jason Murray said.

Footwear retailer Accent Group and Millers operator Mosaic Brands also reported strong trading updates this week.

Accent said sales for the first 27 weeks of the financial year were up by 39% on last year.

Mosaic said group earnings were expected to be around $15.8 million for the first half of 2023, an increase of 198 %per cent on last year.

Other retailers have reported over the past two weeks that conditions are slowing, however: Baby Bunting said its December trading period was weaker than expected (to was actually the first chain to report the weaker than expected performance on the same day at Super Retail revealed better than expected sales).

Online retailer Kogan said sales declined by 32.5% for the first half of the year but that it had gotten its overstocked position under control.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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