Best & Less (ASX:BST) share price slides despite record profit

Despite the company not even having been listed at the end of financial year 2021, its share price slipped on its results.

| More on:
sad child holds paper and leans with head in hand near a computer looking downcast.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Best & Less Group Holdings Ltd (ASX: BST) shares slipped today after the ASX-newbie released its results for the 2021 financial year (FY21).

At close, the Best & Less share price finished at $2.75, 3% lower than yesterday's closing price.

Best & Less share price slumps despite 190% profit boost

Investors drove the Best & Less share price lower in spite of the clothing retailer reporting the following key highlights from its FY21 performance:

Best & Less beat its prospectus forecasts across all key metrics in FY21.

It saw a gross profit of $279.3 million.

The company ended the period with $35.7 million of cash and received $14.1 million of JobKeeper over the period.

What happened in FY21 for Best & Less?

If you're keen to know how the Best & Less share price performed during FY21, you may be disappointed. That's because the Best & Less initial public offering (IPO) occurred after the financial year's end. Those interested can read all about the company's ASX debut here.

During FY21, Best & Less aimed to boost its online sales and its strategy appeared to pay off.

The company's online sales grew by 33.5% in FY21, representing 9.2% of all sales. The increased online sales came after Best & Less introduced click-and-collect and ship-from-store facilities.

Additionally, the company sold nearly 90 million units in FY21.

Best & Less' loyalty programs grew by over 400,0000 members in FY21. The company's loyalty programs had around 1.7 million members as of June 30, 2021.

Best & Less also opened 2 new stores, relocated 6 stores, and closed 7 stores. It ended the period with 245 stores.

The company also published its first modern slavery statement during FY21 and made progress on its living wage commitments. During the period, Best & Less conducted 217 factory audits to ensure compliance across its supplier base.

It also initiated a workers grievance hotline to protect those employed in its suppliers' factories and provide them with a voice directly to the company.

The company also supported 173 different charities through Good360 and partnered with Drought Angels.

What did management say?

Best & Less' CEO Rodney Orrock commented on the results driving the company's share price lower today, saying:

Delivering a record profit and exceeding our Prospectus forecasts in all key metrics, with EBITDA and NPAT ahead 18.0% and 18.1% respectively, is an endorsement of our strategy, leadership in the value retail apparel segment, particularly baby and kids' categories and our omnichannel sales model.

Our strong like-for-like sales growth of 10.8% in FY21 reflects the success of our differentiated customer value proposition of 'twice the quality at half the price'. The robust performance of our core categories, including baby which grew by over 15%, as well as underwear and sleepwear, further highlights the defensive characteristics of our business…

In this challenging environment the deep retail sector experience of our management team pays off, enabling us to respond effectively to rapidly changing conditions. I would like to thank all of our team members for their commitment to providing excellent service, our suppliers for their support during a challenging period and our customers for their continued loyalty.

What's next for Best & Less?

Here's what investors keeping an eye on the Best & Less share price need to know:

The company has been hit hard with COVID-19 restrictions since the end of FY21, with approximately 19.9% of Best & Less' potential trading days being lost due to government-mandated closures. Additionally, stores allowed to remain open have seen reduced foot traffic.

Between 30 June and 22 August, the company's total sales are down 25.7%.

However, over the same period, the company's online sales have grown by 6.8% from FY20 and by 107.5% against the same period 2 years ago.

44 of the company's NSW stores opened again yesterday, in line with government restrictions.

Still, to accommodate lost income, Best & Less is undergoing a capital and hiring freeze and its senior management team has voluntarily reduced their salaries by 20% until the end of lockdowns.

The company is also negotiating with its landlords to "appropriately share the burden of the mandated store closures".

Despite the current struggles, Best & Less expects to achieve its prospectus' EBITDA and net profit after tax forecasts for the 2021 calendar year. These are $62.4 million and $41.3 million respectively.

Best & Less share price snapshot

Since Best & Less listed on the ASX, its share price has gained 15%. Its shares are also going for 27% more than its prospectus' offer price of $2.16 apiece.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Earnings Results

Westpac shares on watch amid $6.99b profit and new buyback

Has the big four bank delivered the goods for investors this year? Let's find out.

Read more »

Woman inspecting packages.
Earnings Results

This top 50 ASX stock is diving 5% despite a strong outlook

Investors were looking for more.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Earnings Results

Macquarie share price sinks despite $1.6b half year profit and new buyback

How did this investment bank perform during the first half? Let's find out.

Read more »

A woman holds her hand out under a graphic hologram image of a human brain with brightly lit segments and section points.
Earnings Results

Why the BrainChip share price is in the spotlight this week

Today's reaction is in stark contrast to the day of the release.

Read more »

Shot of a scientist using a computer while conducting research in a laboratory.
Healthcare Shares

2 All Ords ASX healthcare shares making BIG moves on quarterly updates

These two ASX healthcare companies are seeing heavy trading on Thursday.

Read more »

A businesswoman ponders why her boat is sinking in the ocean.
Resources Shares

Lake Resources share price sinks on quarterly cash flow news

Let's take a look at the highlights of the company's Q3 update.

Read more »

Lithium ion batteries
Earnings Results

Needs a recharge: Novonix share price sees red after Q3 earnings

Investors were likely expecting a tad more.

Read more »

chip and tech stocks represented by two computer chips side by side
AI Stocks

Up 237% in 2024, why is the Appen share price racing higher again today?

Investors are bidding up Appen shares again today. But why?

Read more »