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Summary
- Studio Retail Group Plc has reported 28.0% growth in revenue during H1 FY21.
- The sales to date during Q3 FY21 are already up by 32% year-on-year.
- The online ordering levels have touched 91% during H1 FY21.
Studio Retail Group Plc (LON:STU) is the LSE listed retail stock. Based on its 1-year performance, shares of STU have generated a return of about 44.62%. Shares of STU were up by close to 2.49% from the last closing price (as on 10 December 2020, before the market close at 08:30 AM GMT).
Studio Retail Group Plc is the FTSE All-Share listed company, which deals with clothing, gifts and homeware on its website, having its operations categorized into Studio and Findel Education.
Online retail industry overview
Online retail stores are the virtual platform which engaged in the sale of essential and non-essential items caters to the need of institution as well as customers. Online stores have a tendency to reach a much diverse group of potential consumers, and it can also reduce operating costs by removing the need for having a proper building. The digital transformation and changing consumer habits will increase the penetration of e-commerce around the world, creating further opportunities for successful online businesses. The apparel and footwear section accounts for maximum sales through e-commerce.
Financial Highlights (for 26 weeks ended on 25 September 2020 as on 08 December 2020)
(Source: Company result)
- The Company has reported 28.0% growth in revenue from £181.9 million for H1 FY20 to £232.0 million during H1 FY21, and it is well-positioned for a peak trading session during the Christmas period.
- The sales to date during Q3 FY21 are already up by 32% year-on-year.
- The adjusted operating profit has surged by 63% from £15.0 million for H1 FY20 to £24.4 million during H1 FY21 ended on 25 September 2020 driven by a boom in online shopping amid Covid-19 pandemic.
- With regards to its financial position, the net debt of the Company stood at £293.6 million during H1 FY21 ended on 25 September 2020.
- The closing cash balance has increased from £24.23 million as of 27 September 2019 to £39.85 million as of 25 September 2020.
- The online ordering levels have touched 91% during H1 FY21, while it was 81% during H1 FY20.
Segmental Profitability Analysis
(Source: Company result)
Studio - The Company has delivered a resilient financial performance for its Studio division. The active customer base at the studio went up by 15% to 2.1 million as of 25 September 2020, out of which 1.4 million customers have an active credit account. The divisional revenue and the operating profit went up significantly by 38% and 63%, respectively, due to an increased level of demand.
Education - The revenue of this division has witnessed a sharp decline of 23% due to school closure at the start of the financial year. Similarly adjusted operating profit worsens to £1.0 million and dropped by £2.27 million during H1 FY21 ended on 25 September 2020
Central - The cost for this segment were £2.1 million higher during H1 FY21 than its prior year due to higher administration costs and foreign exchange fluctuations.
Strategic Review as of 08 December 2020
Frasers Group Plc owns approximately 37% of the issued share capital of SRG (Studio Retail Group), and they had drafted a letter on 13 October 2020 mentioning that they believe that SRG is misunderstood by the market and it is significantly undervalued. They believe that the Company should conduct a strategic review to identify and fix their issues.
The two largest shareholders of the Group, Frasers and Schroders, with a combined shareholding of 56% of the total issued capital of SRG have expressed their interest to have a detailed strategic review. The Company is considering the sale of the group to be conducted under the framework of a "formal sale process" in line with the Takeover Code as a part of their comprehensive strategic review to maximize the shareholder value. The Company has already abandoned its plan to sell its education arm to YPD after concerns raised by competition and Market authority (CMA).
Share Price Performance Analysis of Studio Retail Group Plc
(Source: EODHD/Others, chart created by Kalkine group)
Shares of Studio Retail Group Plc were trading at GBX 275.70 and were up by close to 2.49% against the previous closing price as on 10 December 2020, (before the market close at 08:30 AM GMT). STU’s 52-week High and Low were GBX 299.13 and GBX 140.00, respectively. Studio Retail Group Plc had a market capitalization of around £232.53 million.
Business Outlook
The Company has delivered a sparkling financial performance so far in this financial year. It has boosted up the confidence of management in the Company and also medium-term growth prospects of the Group. The Company has taken care of consumer preferences and adapted quickly to become a digital-first retailer targeting larger chunk of customers who prefer to shop online. The Company is on course to capitalize on this festive season and well-positioned to generate a record level of activity levels during the peak trading hours in recent weeks. The promotional activity went significantly down due to lockdown imposed by the UK Government, as a result of which, the Company has delivered strong profitability in the third-quarter till date than the similar period of the prior year.
The product revenue during Q3 FY21 till the end of November is 32% ahead of the prior year, and gross profit margin from product sales went up by 450 basis points. The Company is well aware of the volatile customer environment, However, they have not yet seen any material disruption caused in customer repayments due to Covid-19 pandemic. The Company is highly confident about the medium-term growth of the business.
