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Brexit dents Fat Face's profits

Fat Face AW17

Lifestyle retailer Fat Face has posted a fall in full year EBITDA in the wake of the Brexit vote.

Total sales at the retailer rose by 2.4% to £226.1m in the 53 weeks to 3 June, from £220.7m.

EBITDA for the period dropped by 11.3% to £29.7m. However, it edged up by 0.9% on a constant currency basis.

Chief executive Anthony Thompson told Drapers that EBITDA was mainly hit by the Brexit referendum and the subsequent drop in the value of sterling, since a large proportion of the business’s foreign currency purchase are made in US dollars.

He said this impact was particularly felt in the first half of the year, but that trading picked up in the second half, and the business had made “real progress” since then.

Thompson described the year as a “story of two halves”, adding that its policy on full-price trading helped “protect” its position.

The retailer has reduced net debt to £135.6m after prepaying £15m of debt, driven by “strong” cash generation.

He said: “We’re pretty confident that our positive momentum will continue into the winter season and the Christmas trading period.

“Customers are now more considered about [their purchasing], so at Fat Face we’ve found customers are prepared to pay a little more if they see value for money. It hasn’t been easy, but Fat Face is getting stronger in a weaker market – while it’s getting tighter and tougher, we’re getting stronger.”

He added that its top line has increased every year since the business started in 1988.

The figures were also partly dented by a £9.5m investment in a new 80,000 sq ft distribution centre in Dunsbury Park, which is now fully operational, and in new channel expansion and trading partners.

Fat Face opened 10 new stores, including three in the US, and launched its first US department store partnership with Von Maur during the financial year.

Thompson said the retailer plans to open another six to eight stores in the UK in the next 12 months, and another four store launches are targeted in the US. There are also more partnerships in the pipeline.

The business will also launch a new web platform in a bid to develop its multichannel offering.

“Our strategy going forward is threefold: continued growth in the UK with real estate; ramping up our store [presence] in the US; and focusing on the investments we’ve made to boost our partnerships and channel expansion,” said Thompson.

Fat Face operates 175 stores in the UK high street, 40 in UK holiday destinations and transport hubs, and four outlet sites, as well as 12 international stores in Ireland and the US.

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