Shares of troubled Footasylum, the recently-floated Rochdale youth footwear and apparel retailer, fell another 50% on Monday after it said its revenue growth is now expected to be below current market expectations and that it expects earnings for the full year to be “significantly lower than previous guidance.”
Footasylum executive chairman Barry Bown said: “These are undoubtedly challenging times in the retail industry and, in common with many other businesses, Footasylum’s trading has continued to be impacted by weak consumer sentiment.
“On top of that, increased clearance in stores has led to a reduction in gross margin, and we have also had some unforeseen delays in our new store openings and upsizes.”
In a stock exchange statement giving a trading update for the six months ended August 25, 2018, and guidance for the year ending February 23, 2019, Footasylum said it expects to report revenue of £98.6 million for the six months, an increase of 18.5% on the corresponding period in the prior year.
The company added: “Whilst trading since the beginning of the current financial year has been impacted by weak consumer sentiment on the high street, the company’s store performance for May and June was positive, as reflected when the company gave guidance for FY19 in June.
“However, store performance during July and August was more challenging which, in the context of there being no sign of a recovery in the short-term on the high street, has led the board to reassess its overall expectations for the balance of FY19.
“While online and wholesale revenue continues to perform strongly year-on-year, store sales have been disappointing, which has been exacerbated by some unforeseen delays in the company’s new store openings and upsizes.
“Despite an ongoing programme of investment to drive sales, Footasylum’s revenue growth for FY19 is now expected to be below current market expectations.
“As a result of this, and a lower overall gross margin from a higher amount of clearance activity in stores, the board now expects adjusted EBITDA for the full year to be significantly lower than previous guidance, at less than half of the FY18 adjusted EBITDA of £12.5 million …”