Space NK is bucking the high street gloom after it unveiled plans to open more stores across the UK amid double-digit sales growth.
Chief executive Andy Lightfoot – who has only been at the helm since early June – said the beauty retailer was looking to expand its 69-strong network across the UK and Ireland, as well as its US chain over the next few years.
Speaking about the expansion Lightfoot said that the next tranche of openings will cap a decade-long store expansion run and follows double-digit like-for-like sales growth in its first quarter to the end of June – and “substantially” higher growth online.
He added that the bottom line is “healthy” but not growing as fast as sales, mostly due to the focus on investing in its store estate.
However, for the year ending March 31, pre-tax profits for the year surged 44 per cent year-on-year to £6.3 million while sales grew 6.7 per cent to £102.9 million.
Meanwhile, underlying pre-tax operating profits grew eight per cent at £6.4 million.
Space NK’s expansion plans will see the retailer open new UK stores including in Marlborough, Wiltshire; Beverley in Yorkshire; Brent Cross; and Reigate in Surrey.
Chloe Collins, Senior Retail Analyst at GlobalData, a leading data and analytics company, comments: ‘‘Space NK delivered another robust set of results for the year to March 2019, with a £6.0m increase in total revenue to £108.9m, however operating margin (before exceptional items) declined from 6.3% to 4.7%, largely driven by differences in foreign exchange rates.
Its domestic performance was particularly impressive, meaning it outperformed the UK health & beauty sector, which only grew by 1.8% in 2019, with its market share increasing 0.1ppts to 0.5%, despite the increasing threat from online pureplays and greater physical expansion from high end beauty brands.
Although its growth was partly driven by store expansion, Space NK also fulfils the desire among young shoppers for unique premium brands, and takes advantage of the shift in consumer focus towards self-care and wellness.
Space NK reported strong digital growth for the period; however it faces growing competition from online pureplays such as Feelunique and Cult Beauty, which continue to gain traction in the market. To ensure its proposition is competitive, online fulfilment options should be enhanced by providing free delivery for its N.Dulge Deluxe loyalty scheme members, a later cut off time for next day delivery, and third-party pickup options.
As its same day delivery option within central London acts as a point of difference, it should extend this service to other major cities and promote it more heavily on social media to raise awareness. With online pureplays frequently discounting, Space NK must ensure it does not resort to similar promotional tactics, which would dampen the retailer’s premium image.
To protect itself from price comparison and boost unique appeal, it should seek more exclusive brand partnerships, following its UK launch of Drunk Elephant in 2018.
Upon Andy Lightfoot’s promotion from group digital director to CEO in June 2019, he announced plans to continue expansion of Space NK’s UK store estate, which currently sits at 72 sites.
Although the beauty specialist drives destination appeal through attentive customer service, a peaceful store environment, and engaging instore events, such as new collection showcases and new loyalty scheme member gatherings, further store openings should be approached cautiously as the UK high street continues to suffer and suitable sites in affluent locations are harder to find.”
