Superdrug has challenging year but online sales rise strongly

By

Sandra Halliday

Published
Jul 12, 2021

Beauty retail chain Superdrug has filed its results for 2020 and they make interesting reading given that the period included quite a few months of lockdown during which the company was able to continue trading from its stores.

It’s clear that the advantage of being able to keep its stores open was a slim one in some respects as footfall plunges meant that fewer consumers were passing by its physical doors.

In the 52 weeks up to December 26 2020, the retailer said it faced “challenging” times due to the pandemic that caused “very significant” disruption. The average lockdown-driven footfall decline of 75% to physical shops resulted in it temporarily closing 230 of its stores during the first national lockdown. 

This meant revenue during the second quarter declined by 40%, even with online trading seeing a “significant” increase.

But the company recovered in the second half as restrictions were lifted and before the November lockdown in the important trading period up to Christmas further impacted the year. It all meant that revenue for the full year declined by 15% to £1.111 billion. In the comparable period in 2019, it has been £1.304 billion.

But while a 15% revenue decline might not look bad, the company said that pre-tax profit fell a massive 79% to £18.4 million, driven by the impact of that revenue drop. Net profit dropped to £14.6 million from £19.6 million. 

That was despite it taking a series of measures to reduce costs, cut its capital spending and preserve cash flow. The company had also benefited from £14.2 million of government grants linked to the coronavirus job retention scheme.

But the declines were still huge and meant its operating margin dropped to 3.2% from 8.2%.

The company said the events of the past year have emphasised how important a multichannel strategy is and how the focus on online is crucial. While it certainly also focused on his physical shops and opened seven new stores last year, it also closed 20 physical spaces, reducing its trading estate to 788 stores at the end of the year. 

That makes sense given the growth in its online channel (for which it didn’t give a specific figure), although this growth was helped by the existence of the store network. The company was able to offer order & collect in all stores, as well as home delivery in major city centres, both of them in just 30 minutes. It also used its store estate to provide a flexible fulfilment model to cater for growing online demand, and it relaunched its app during the year, which helps drive online customer conversion to record levels.

It didn’t say anything about product sales, but we know from its beauty peers that discretionary beauty products (and especially make-up) were less popular last year. However, it’s likely to have benefited from an upsurge in spending on health-linked items.