MySale, the online flash sale retailer part-owned by Sir Philip Green and Mike Ashley, has issued an unexpected profits warning, prompting a plunge in shares that wiped out almost half the company’s market value.
It said in an unscheduled trading update that MySale revenue and profits for the year to 30 June 2019 were expected to be significantly below market expectations, blaming “challenging conditions” in the run-up to Christmas.
Shares dived in the Australia-focused but UK-listed firm, closing down nearly 50% at 17.40p, wiping £27m off the value of the company.
It left Green and Ashley with paper losses of more than £5m and £1m respectively. Green’s Shelton Capital fund, controlled by his wife, Tina, owns a 22% stake in MySale, while Ashley’s Sports Direct owns about 5%.
MySale holds flash sales offering big discounts on fashion, homeware and cosmetics, with members alerted by email. Its biggest market is Australia, followed by New Zealand, then south-east Asia and the UK.
The business was founded in Sydney in 2007 by brothers Carl and Jamie Jackson, who saw an opportunity to offload surplus end-of-season winter stock in the UK to Australian consumers preparing for winter weather. It sells products from about 2,500 different brands, many of them UK-based.
Carl Jackson, the chief executive, said in Tuesday’s trading update the group had a strong balance sheet, despite “a short-term dip in revenue and profitability”.
He added: “We are very disappointed in the performance during this year’s peak trading period. In response to this underperformance we have significantly accelerated and expanded our existing plans to streamline the business, reduce the cost base and make changes to the product strategy. The results of these actions will be realised in the second half of this financial year.”
The group’s flash sales brands include OzSale and BuyInvite in Australia and Cocosa in the UK.
MySale said it expected to make a small underlying loss for the first half of the financial year after trading was hit by changes on 1 July to general sales tax regulations in Australia, which increased its costs. The company initially passed on the increased costs to customers, before reversing the decision after sales fell. Higher levels of discounting in November also had an impact.
“The group’s plans now assume that the gross profit percentage earned on certain product categories will permanently be lower,” MySale said. It expects to return to an underlying profit in the second half of the year.
