Douglas - Online Margin
All,
We bought a big position in the subs at 50c/E last year. So of course it feels great to see a lot of work pay off so handsomely (and no other name losing 50%…). But beyond that, today’s results carry interesting news for other retailers: Migration to e-commerce can be profitable.
Douglas Online is profitable:
- Naturally, e-commerce grows quickly and top-line results had previously been flagged. But few e-commerce pure-plays out there are both growing (at 73% YoY) and are significantly profitable too.
- The company does not break-out online vs offline profits or EBITDA, but given lockdowns shut many of its stores over Black Friday and Christmas, the drop of E-300m of store sales should have impacted EBITDA contribution of E-130m. Lower other operating income and increased logistics expenses for online should have dropped EBITDA by another combined E30m, the latter only slightly offset by some lower rent (restructuring not yet effective in Q1). Savings from personnel in furlough contributed some E20m.
- EBITDA however did not fall by E-140m, but only by E-40m (adjusted) or E-70m unadjusted, the primary difference being an approx. E70m of additional Gross Margin generated from e-commerce, which fed all the way through to EBITDA - i.e. produced little extra expenses.
- That Douglas’ e-commerce operation is profitable should come as no surprise, since the company has been maintaining that earnings margins are on par with the store chain. But while we believed that then, we’ve now seen it too.
The implications for other online retail migrations are encouraging.
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003