Analysis: Notonthehighstreet profits climb despite flat sales

The specialist online marketplace posted an 82% surge in operating EBITDA to £3.1m in the year to March 31 2019, spurred by cost efficiencies primarily driven by bringing the business’ digital marketing divisions in-house and taking a more targeted approach to advertising spend, prioritising more profitable customers.

The etailer’s sales were broadly flat year-on-year at £35.2m, as sales declined in the first half year-on-year against promotion-led comparatives but rose in the second half.

Notonthehighstreet’s number of active customers increased 3% to 2.6 million during the period, while post-tax losses narrowed to £1.5m from £3.1m the previous financial year.

Chair Darren Shapland told Retail Week: “The year pretty much panned out as we thought it would do. The first half was always going to be difficult because we were up against comparatives that included lots of Sale and promotional activity.

“The critical Christmas period in the second half was a good growth period and it means that broadly turnover was flat year on year, with strong momentum in the second half which has translated nicely into this year.”

Well appointed

The online marketplace made several executive appointments during the financial year including chief financial officer Phil Branston and chief technology officer Richard Zubrik, who were poached from Just Eat and Asos respectively.

The etailer also appointed HelloFresh’s former UK boss Claire Davenport as its new chief executive in August, succeeding former boss Barrie Seidenberg who stepped down after being diagnosed with a brain tumour.

Shapland says this series of appointments mean Notonthehighstreet is well-placed to drive further growth in the year ahead.

“It’s a brilliant brand and it’s a business that has even more relevance now than ever, but I think it’s fair to say we haven’t potentialised everything we could have in the last few years because we’ve not had the full leadership on board,” he says.

“Now we have that full leadership with strong momentum, cash in the bank and doubling profits it feels like we are very well set up. I can’t say we’ve fired on every cylinder when we’ve not had a chief executive for a period of time, or a chief executive who has been unwell, but now we have a full executive team I think we’ve got some really exciting times ahead.”

Being relevant

Davenport believes that the online marketplace’s proposition makes it particularly relevant to modern shoppers.

“The generations that are coming up now, buying houses and having children, are much more worried about providence and how their goods are made and sourced. They care about who makes them, whether they are ethical and they like the idea of supporting small business. That generation doesn’t want mass-produced stuff anymore, so what we do really resonates,” she says.

Although Davenport is still developing her wider strategy for the group she believes that international expansion will likely play a role.

“We think that there is definitely an international opportunity. How big that is we haven’t settled on yet, but there’s not really any reason not to,” she says.

However, Davenport says that whatever strategy the business embarks on under her leadership will be impacted by the outcome of Brexit.

“What we don’t want is something that will massively disrupt consumer confidence, hit supply prices, hit the ability to get supply into the country – and all the things that we’re concerned about are probably exacerbated in a no-deal scenario,” she says.