Well the UK high street might be taking a pounding from the pandemic, but that’s not the case with Sosandar LON:SOS. A challenger to Boohoo’s crown, Sosandar is an online fashion retailer which has been doing very well during lockdown.
We picked up movement in the share price on 17 February as the stock began picking up massive buy side volume. At the time it was trading at around the 13.50 mark, but has since built on that to hit 16.00 at the time of writing. Volumes are not at the levels we saw earlier in the week, but it certainly still looks bullish.
Sosandar has a lot of ground to get back to historic highs, which also makes us feel more positive. The shares have a 52 week high of 20.95.
What is driving the Sosandar share price?
The company has a number of factors pushing it in the right direction. Firstly, the ongoing vaccine campaign in the UK holds out the prospect of the retail sector generally getting back on its feet later in the year. Good news all round.
Sosandar is also a digital retailer, and before we all got into this mess, it was digital retailing which was eating the high street’s lunch, not COVID. That theme is going to re-assert itself again in 2H we believe, and Sosander is in a good position to benefit from that.
The company’s leadership is demonstrating its dynamism, recognising the need to change course quickly in the face of changing demand. The nationwide lockdown had an impact on what women wanted to wear, as they largely prioritised clothing that was comfortable, but also made them feel good. Evidencing this, Sosandar reported an increase in sales of loungewear (up 3,500%), denim (up 128%) and tops (up 72%).
“We are an agile business and our online model and entrepreneurial mindset meant we were able to rapidly change stock in response to demand,” the company told analysts in September. “Our previous investment in our design capability and widening of the product range was vital in us being able to cater to our customers’ needs.”
It’s not just about the post-COVID recovery story
Sosandar came off the highs it achieved last year as investors worried about the second wave of the pandemic. In its results for the half to September, the company revealed 52% revenue growth to £4.28m along with a 62% reduction in EBITDA loss to £1.02m. Sosandar told the market it was cutting back marketing spend and prioritising cash preservation.
It has also relaunched its brands on the John Lewis and Next websites. Going into the autumn – and the second wave – Sosandar was already delivering increased sales, better cost efficiency, and had improved its engagement with customers. Its database was expanding, it was reducing marketing spend and it was expanding its product range.
The company seems to be conservatively managed and it not getting ahead of itself. We like the strategic distribution tie-ups with the likes of John Lewis. Shore Capital analyst Greg Lewis also likes the confident tone of the management team, and its ambitions to deliver long term, sustainable success. Let’s not forget that there has been something of a winnowing on the UK high street, with both Debenhams and Arcadia going through administrative restructurings.
This is a pure play womenswear business that is emerging from the pandemic in solid shape. The stock is off 52 week highs and has some solid growth momentum driving it into a less competitive market than existed for it in Q1 2020. There has been some very heavy buying activity in recent days. We don’t see any strong reasons why this stock can’t get to 30 or even 40 in the next 12 months.
