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Monsoon swings to a loss as trading challenges continue

  • Monsoon Accessorize is undergoing a strategic reorganisation
  • It has exited 14 international markets and is reviewing its UK store portfolio
  • The new womenswear design direction has been well-received, it said

Monsoon Accessorize made a loss last year after its sales were hit by tough trading conditions in the UK and some international markets, Drapers can reveal.

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The womenswear, kidswear and accessories retailer made a loss after tax of £617,000 for the 52 weeks to August 29 2015, down from a £18.4m profit the year before.

It said this “very disappointing set of numbers” was largely caused by a decline in UK sales, which were hit by unseasonable weather patterns, as well as “significant levels” of discounting and competition.

Its international business – representing around 9% of total sales – was also affected by political uncertainties and volatile foreign exchange rates. Overall, turnover slumped by 8.6% year on year to £434.2m.

The company remained profitable at an EBITDA level. However, the falling turnover and adverse foreign exchange movement dragged its EBITDA down 59% to £19.3m.

It had more than £40m cash at the end of the period and has no external debt or pensions liabilities.

Paul Allen, who was appointed as interim chief executive of Monsoon Accessorize in March 2015 and took up the role on a permanent basis in January of this year, is overseeing a “far-reaching” strategic reorganisation of the business in the hopes of stemming its losses.

The turnaround plans were first outlined last year, when Monsoon revealed a slump in its sales and profits and began work to close underperforming stores, reduce stock levels and improve its ranges.

As part of the reorganisation programme, it is focusing on how its three brands – Accessorize, Monsoon Ladies and Monsoon Children – are operated in the UK, developing different strategies to address their distinct customer propositions.

Nikki Hamwee was appointed as brand director for Monsoon Ladies in July 2015. The company said she has “initiated a revitalisation of the brand” and there are early indications the new design direction is being well received by customers.

As Drapers revealed last week, former New Look group marketing director Gill Moore has joined the wider business as its first chief customer officer.

Monsoon Accessorize had 318 stores in the UK and Ireland at year-end, and 926 internationally.

It is continuing to reshape its UK property portfolio by taking the opportunity to close unprofitable stores when the leases expire or by executing break options, although Drapers understands there is no intention to significantly reduce the number of stores.

It is also developing its concession business for all three brands. At year-end it had opened concessions in 21 Debenhams stores, as well as online with Debenhams, House of Fraser and Amazon.

Monsoon has completed a review of its international business and identified key markets on which it will concentrate. As a result it has exited 14 “non-core and unprofitable markets”, including Venezuela, Poland and Finland. 

It is now concentrating on driving performance of the Accessorize and Monsoon Children brands in Europe and in the Middle East, where it has formed a joint venture with Dubai-based shopping centre owner Majid Al-Futtaim.

“While this is a very disappointing set of numbers the company has very strong brands in Accessorize, Monsoon Ladies and Monsoon Children, as well as a strong underlying international business,” the company said. “These brands, together with a balance sheet free from external debt, provide an excellent platform from which to build our recovery.

“While profitability is likely to remain depressed in the current year, the board has no doubt that the actions that have been put in place will address the issues which have impacted on the performance of the company and has every confidence that the company can return over the next few years to the levels of profitability which it has enjoyed in the past.”

The company, which is owned by its founder, Peter Simon, paid an interim dividend during the year of £19.6m, down from £21m in 2014. It is not proposing a final dividend this year.

 

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