Verimark blames advertising costs for plunging profit
After-tax profit dropped 56% in first half, but the direct-response retailer is promising a better second half
Direct-response retailer Verimark blamed advertising spending for its interim profit falling by more than half.
Sales for the six months to end-August grew 14% to R210m, but after-tax profit plunged 56% to R1.1m from R2.5m in the matching period.
The retailer said its advertising costs increased by 85.7% to support an increased number of products introduced during the reporting period.
“The financial benefits of this increase in new product introductions will be seen in the months ahead,” Verimark said.
No interim dividend was declared. Verimark last paid an interim dividend in 2006.
“Verimark has increased its inventory levels and its product mix to ensure maximum revenue growth over the festive season,” the results statement said.
“In the past six months, necessary costs were incurred through higher inventory levels, increased advertising costs and store setup costs, which have positioned the company well to deliver an improved second-half performance.”