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Moss Bros sales and profits fall

Moss Bros has revealed a drop in revenue and profits for its first half, which it has blamed on the extended period of hot weather and “the distraction” of England’s success at the World Cup.

Total revenue excluding VAT for the six months to 28 July fell 3.3% year on year to £64.5m.

Like-for-like retail sales, including e-commerce were 6.9% lower than the same period in 2017.

Online like-for-like sales for the first half were up 9.5% on the previous year however, and now represent 12.7% of total sales, compared to 11.2% in 2017.

Like-for-like hire sales, which represented 12.3% of total sales in the first half, were down 7.8%.

Retail gross margin was 2.8% lower than last year at 56.5%.

EBITDA for the first half was £3.7m, down from £7m for the same period in 2017.

Adjusted profit before tax was £200,000 down from £3.9.m.

The business made a loss before tax of £1.7m after adjusted items of just under £2m, compared to a £3.9m profit in the first half of 2017.

Adjusted items consisted of store impairments (£1.2m) and employee-related costs (£0.8m).

During the first quarter the group faced a shortage of stock which resulted from the previously announced temporary supply chain issues. The stock position has been corrected and the business said it has started to see significantly improved trading.

Moss Bros said footfall in the second quarter fell by 7% on average due to the extended period of hot weather coupled by ”the distraction” of England’s success in the World Cup. It estimates that it was negatively impacted by around £2.7m of retail store sales, which would have delivered around £1.4m of gross profit.

In current trading retail like-for-like sales, including VAT, in the first seven weeks to 15 September were down 3.7%.

Ecommerce sales, including VAT, in the first seven weeks of the half were up 23.2%.

Commenting on the results and outlook, Brian Brick, chief executive, said: “The first half trading performance was one of the most volatile for many years. We initially saw sales performance recover well following our previously highlighted early season stock shortages, and sales were generally ahead of expectation. This came to an abrupt end when high street footfall dropped dramatically, impacted by the protracted and unplanned period of extremely hot weather and the widespread distraction of England’s success in the World Cup. Although all retailers were impacted in some way, menswear was specifically impacted negatively by the combination and longevity of these two external factors. The position was exacerbated by the distressed discounting of some competitors, although we have taken the decision to stand firm on pricing where we feel Moss Bros’ product has a strong USP.

“Where a small number of our stores have underperformed against our expectations, we have decided to impair the carrying value of the related fixed asset. We believe it is right to be prudent in our assumptions, given the current trading environment, although we do have detailed action plans in place to improve performance in these stores.

“More positively, the early response to the 2018 autumn ranges has been strong and we are well stocked as we enter the new trading season. We remain agile in our trading approach and we will maximise our share of the men’s formalwear market by continuing to invest in the strength of our brand, our expertise and the breadth of our product offer, both in-store and online. In addition, we will be increasing the presence of a selected number of our sub-brands on major third-party retail marketplaces.

“We remain acutely aware that the highly competitive retail landscape is set to continue, alongside an unpredictable economic back-drop and increasing cost headwinds. We have reviewed our expectations for the second half of the year despite having a number of key trading weeks still ahead of us and whilst short-term cost cutting would make us more certain of mitigating the footfall related gross profit shortfall and therefore hitting the market’s expectations, we feel it would be detrimental to the long-term health of the business. As such, we have taken the decision to continue to invest and to deliver profit lower than expectations.”

 

 

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