Off-price fashion etailer MySale Group has warned its full-year pre-tax profits will be “materially below expectations” following a weak performance in its home markets of Australia and New Zealand.
The company’s share price slumped by 48.6% to 89p following the profit warning on Monday. Arcadia boss Sir Philip Green saw the value of his 25% share, which he bought before MySale floated on the Alternative Investment Market (Aim) of the London Stock Exchange on June 16, more than halved to £23m.
Sports Direct’s Mike Ashley, who snapped up a 4.8% stake two days after the IPO, is thought to have lost £6m.
MySale revealed sales in Australia – where it was founded in 2007 – and New Zealand were flat in the five months to November 30. It said competition had “increased noticeably” amid the ongoing economic challenges in both countries.
It was therefore forced to make a number of one-off investments to stimulate growth in those markets, totalling AUS$ 9m (£4.72m).
Overall, MySale reported a 4% rise in revenue year on year in the five-month period, thanks to a stronger performance in Asia – where sales were up 29% – and the rest of the world, including the UK and US.
MySale sells retailers’ excess stock at a discount to its 15.5 million members. It now operates in 10 countries: Australia, New Zealand, the UK, US, Thailand, the Philippines, Malaysia, Singapore, South Korea and Hong Kong. It declined to provide a breakdown of sales by market.
Trading in the UK in particular, where it launched a dedicated website in July, is ahead of expectations. It has now secured a London office space in addition to its 60,000 sq ft distribution centre in Corby, Northamptonshire.
Joe Doveton, head of conversion at Oban Digital, which works with businesses operating global websites, said MySale should scale back in Australia and focus on markets showing a higher return, such as the UK. “Australia is now feeling the global pinch we have for the past five years and there’s a general pessimism around the market.
“[MySale] has been guilty of gravitating towards the big markets on its doorstep rather than what’s right for the business. It is doing well in the UK because the market is gung-ho for bargains and [shoppers] are price-sensitive.”
Nick Hood, business risk analyst at Opus Restructuring, agreed. “The Australian market is not going to recover any time soon, so it’s not that they’re throwing money into a black hole, but an unresponsive hole.”
MySale said it anticipates double-digit growth in revenue for the full year. It will deliver its interim results for the six months to December 31 on February 27, 2015.