The Company reported a net loss for the year of $2.8 million, which includes an increase in depreciation of $2.8 million attributable to impairment of assets in relation to stores that are part of the Company’s store rationalization program.
While challenging economic and retail market conditions continued throughout the year to June 2012, the underlying trend in Specialty Fashion Group’s sales and gross margins improved in the second half of that year, largely as a result of improvements made in its supply chain.
The Company remains focused on enhancing its supply chain and through doing so improving its gross profit margin from the current level (58.1% for the year). This is being achieved through improvements in purchase commitments driven from reductions in the underlying cost drivers of fabric and product manufacture, more favourable hedged USD exchange rates and further internal improvements in supply chain management.
In addition, the Company has continued to aggressively pursue online sales growth and the delivery of omnichannel shopping experiences through investment in a new e-commerce platform, expansion of its online logistics operation as well as leveraging its customer relationship management capabilities. In FY2012 the Company’s online sales grew to $15 million, representing 2.6% of total revenue. Email membership grew to 2.1 million members.
Despite the weaker trading performance, operating cash flows were higher than the prior year at $36.5 million, due to the efficient management of working capital. During the year the Company invested $16 million in capital expenditure, primarily in stores and IT, and ended the year with a net cash position of $4.1 million. The Group has available debt facilities of $85 million, of which $6.5 million was used at the end of the year.
The Company expects an improved trading performance in FY2013, although it remains cautious as to the extent to which macroeconomic factors, both in Australia and abroad, may adversely influence consumers’ propensity to spend on discretionary items. The targeted strategic initiatives in relation to eCommerce, customer relationship management and the supply chain are progressing well, and the Group will continue to pursue new opportunities for growth including Stylefix.com, the new online business launched on 2 July 2012.
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