Hobbs fell into the red in 2013 after a disappointing reaction to its autumn 13 range resulted in the retailer’s turnover dropping 8.2% to £111.7m in the year to January 25, 2014.
The retailer reported a £1.9m pre-tax loss in the UK for the year to January 25, 2014, according its Companies House accounts, published this week. It made a £8.2m pre-tax profit during the previous 12 months.
Hobbs said the disappointing sales performance was largely due to changes made to its autumn 13 collection, which were “not well received”. This put pressure on its gross margin, which declined by 0.8% to 62.5%. More than 90% of Hobbs’ range for this season was refreshed.
The retailer suffered a particularly difficult Christmas, which led to private equity owner 3i writing down the value of its investment in Hobbs by 40%. At the beginning of August, Hobbs revealed it was restructuring following a business review, with some buying and support functions affected. It has not provided further details on the plans.
In its annual accounts on Companies House, it said: “The disappointing performance [in 2013] was the result of changes to the core range, which were not well received. The unseasonal weather was unhelpful but not the principle cause of the underperformance against our expectations.
“Actions have been taken to refocus the range, which together with a robust review, gives us confidence that future performance will improve during the year.”
When contacted by Drapers, Hobbs would not comment on what it has done to change the range from spring 14 onwards. The Companies House accounts went on to say: “Autumn 13 was a very challenging season and, while spring 14 was designed broadly in the same aesthetic, we have made some changes and early indications are that spring 14 has been better received. Autumn 14 will see further changes to reflect the needs of our customers and we expect it to deliver positive sales growth.”
Hobbs’ chairman Phil Wrigley added: “Last year’s results reflect the challenging trading we experienced over the festive period and the action taken to exit unsuccessful autumn/winter stock. Over the last few months we have successfully undertaken a strategic review of our entire operation which has resulted in the reported restructure of the business last month.
“This restructure has positioned us for growth both here in the UK and internationally as we look to expand further into the US, following our successful launch in Bloomingdales in the first quarter of 2014.”
As part of its international strategy, the retailer launched three international websites in the US, Australia and Germany. However, it decided to accelerate its overseas store rationalisation programme in 2013, closing nine stores at a cost of £3m. It has not revealed where these stores were located.
Since year-end, Hobbs has opened additional franchise stores in Sweden and the UAE and five concessions in US department store Bloomingdale’s. “We are encouraged by their initial performance,” the retailer said.
Hobbs opened two new stores in the UK during the year and refurbished seven, but closed six stores that had come to the end of their leases. It opened one concession and relocated another.
The retailer said its square footage in the UK was “likely to decline slightly” in 2014, but it expects its international footprint to expand.
In the UK, it will focus on improving performance through cost control, improving efficiency and managing stock tightly.
Meg Lustman was named the new chief executive of Hobbs in July. She will start the role in September. Wrigley said Lustman would “steer Hobbs through its next phase of growth and international development”.