Shaver Shop hurt by fraud, supplier liquidations

Profit down for FY18.

A former Shaver Shop store manager committed unauthorised sales, totalling $327,000, and two suppliers filed for liquidation during the year ended 30 June, 2018. This resulted in a 27% drop in net profit to $6.6 million for the reported period.

The former store manager sold products through Daigou channel – shoppers who buy local products to sell to consumers in China – at prices significantly below cost of goods and falsified point of sale (POS) transaction documentation to conceal the fraud.

“External investigation is being undertaken and further controls have been implemented to mitigate future risk,” the company told investors in its full year results announcement.

Normalised gross profit was up 7.9% to $64.2 million, at a margin of 41.4% for FY18. Margins in the second half were dampened due to a strategic decision to rationalise the hair styling product range to make room for the ghd brand, as well as discounting to clear some slow moving stock lines.

“The ghd launch has met our expectations, returning sales and margin growth to hair styling after more than 12 months of decline,” CEO Cameron Fox said.

Excluding the Daigou impact, underlying like-for-like corporate store sales growth continued to improve and grew 2.9% through the second half. Growth was underpinned by hair removal categories across beard trimmers and men’s wet shave.

“We have a great sales team with world-class in-store customer service metrics. Our Net Promoter Score consistently averages above 80 and our sales conversion metrics increased to more than 34% in June. That means that one in three people who are entering our stores are making a purchase, a compelling result that we can further improve on in FY19,” Fox said.

Online sales grew 47.4% in FY18 and now represent approximately 10% of total network sales. Shaver Shop has appointed a new chief marketing officer and head of e-commerce that both come with significant and relevant experience in the retail sector.

“We are investing further in enhancing our omni-channel capabilities both through the implementation of a new CRM as well as refinements to our online user experience,” he said.

The specialist retailer is also building a private label product range with the launch of LumiSkin skin rejuvenation range in Q3 FY18 and the launch of Flair hair styling in Q2 FY19.

The Shaver Shop corporate store network grew to 106 stores at 30 June 2018 with 100 stores in Australia and 6 in New Zealand. Shaver Shop also has 9 franchise operated stores. The group has committed to another 5 new stores during FY19.

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