Maternity-wear specialist Seraphine recently released its trading update for the first half of the year, which covered the 26 weeks leading up to October. The company reported a slight decrease in product revenue and expected to incur an adjusted EBITDA loss. This decline can be attributed to challenges faced in the retail industry and softer trading during the summer months, reflecting the overall trend in the retail sector.

One area where Seraphine saw a downward trend was in its own digital platform sales, which decreased by up to 9% or 12% at constant currency. The company attributed this decline to higher marketing costs, which led to lower marketing spend than planned. Additionally, digital partner revenue also saw a decrease as the company aimed to improve profitability in this channel.

On a positive note, Seraphine experienced growth in trading at its retail stores, with a year-on-year increase of 20% during the period. However, it’s important to note that the retail stores have not yet reached pre-pandemic levels and remain a small part of the overall business.

Seraphine mentioned that although gross sales and basket sizes improved compared to the previous year, return rates returned to pre-pandemic levels, which affected net sales. However, in contrast to other online retailers, Seraphine did not experience return rates higher than pre-pandemic levels. This can be attributed to the nature of its products, its niche customer demographic, and its carefully managed promotions and pricing strategies.

The company also emphasized that customer acquisition costs inflation decreased during the second quarter, and it has started implementing a strategy to diversify marketing channels. Seraphine remains optimistic that these efforts will lead to further improvements in customer acquisition costs.

Looking ahead to the new season, the start of AW22 showed promising results, but more recent trading has been weaker, aligning with the broader sector. Seraphine expects continued volatility in trading throughout FY23 but anticipates the second half of the year to be better than the first half. This optimism is based on the annualization of normalized return rates and higher marketing costs, as well as the benefits from seasonally higher basket sizes and lower return rates. Furthermore, Seraphine expects the second half to be profitable on a post-IFRS16 adjusted EBITDA basis.

Useful links:
Seraphine Official Website
Retail Dive’s article on retail transformation amid the pandemic