Very Group to return to profit after topping £2bn sales amid pandemic

Online retailer The Very Group has said it will return to profit for the first time in three years after surging sales amid the pandemic saw revenues top the £2 billion milestone.

The firm – recently rebranded from Shop Direct – said sales jumped 36% higher in its final quarter to the end of June as the closure of non-essential shops during the coronavirus lockdown drove customers online.

It saw electricals sales leap 78% higher, with 53% growth for home categories, though it said there was a “significant” decline in fashion sales, which hit cash margins.

Overall group retail sales, including Littlewoods, rose by 28% in the fourth quarter.

The fourth-quarter boost helped annual group revenues rise past £2 billion for the first time and Very Group said it now expects to return to pre-tax profits in the year to June 30.

It is expecting underlying earnings in the range of £255 million to £270 million.

Chief executive Henry Birch said the performance was far better than the group expected at the start of the coronavirus crisis.

He told the PA news agency: “We, like every other company in the UK, didn’t know what to expect and we modelled a scenario of minus 25% sales for the quarter ahead.

“We have clearly blown that out of the water.”

He said the group’s multi-category offering – from fridge-freezers to blow up Jacuzzis – helped drive demand, with best-sellers including Apple Airpods, Amazon Fire Sticks and the Animal Crossings: New Horizons video game as Britons looked for ways to entertain themselves in lockdown.

The firm also pressed ahead with the opening of its new automated warehouse, called Skygate, in the East Midlands, which helped it meet the ramped-up demand and processed its one-millionth customer order last month.

Mr Birch said the new warehouse is “game-changing” for the firm as it takes advantage of the accelerated shift online.

“Economic conditions will continue to be challenging, but we believe we are more relevant than ever for customers, who are increasingly buying online,” he said.

Very Group also saw soaring demand for credit during the lockdown, with an 80% rise in new credit customers.

Mr Birch said the group – which makes 95% of its sales through credit accounts – is “alert” to the potential for rising default rates amid mounting job losses in the UK.

But default rates so far remain in line with historic levels, with more of its customers actually paying off balances due to the uncertainty.

This is having a knock-on effect on its financial services profitability, it said.