Paul Smith’s sales and operating profit before exceptional items fell in the last year, as the UK fashion brand experienced weak demand and challenging market conditions around the world.
Sales fell 6.7% to £178.6m for the year to 30 June 2016, while operating profit before exceptional items dropped 63% year on year to £4m, accounts filed at Companies House show.
The exceptional items include restructuring costs from the firm’s reorganisation of design teams, products and collections. Paul Smith consolidated seven lines into two last year: Paul Smith and the more contemporary collection PS by Paul Smith.
Operating profit after exceptional items was up 20% on the previous year to £11m and profit for the year was £7.9m compared to £6.1m in 2015. The firm paid out £4.4m in dividends, up from £3.7m in 2015.
“Retail sales are expected to overtake wholesale as our biggest channel for the first time in the coming year,” said managing director Ashley Long, pointing to a move towards strategically placed stores and key wholesale accounts, which support a comprehensive omnichannel service.
Wholesale remained its largest channel in the year but, due to weak demand in core markets of the UK, France, Russia and parts of Asia, sales fell 13% year on year.
Retail sales increased by 2.2%, and fell 2% on a like-for-like basis, reflecting a mixed performance across its core markets and the closure of the Fifth Avenue store in New York in January 2016.
During the year, the firm opened new stores in Glasgow and Dover Street Market in London. It has since relocated on Rue St Honore in Paris and opened in Birmingham and Sydney.
Online sales increased by 11% during the year, representing 16% of sales – up from 13% in 2015.
“While the wholesale market is in a period of rapid change, we do anticipate sales stabilising in the future,” said Long.
“Geographically we saw many challenges in the year. In Europe our traditional independent wholesale customer base continued to shrink. In Asia, outside of Japan, we saw a general slowdown in the ready to wear markets. In the Middle East our partners experienced low customer confidence brought about by the unsettled political situation. However, the US, Australia and South Africa all saw positive growth in the year.”
The firm said it continued to reduce overheads and had sought to become more agile in response to the market conditions and uncertainties following the Brexit vote and other external factors.
But Long added: “We expect the current challenging trading conditions to continue for the foreseeable future.”
The company said its new collections have been well received, with like-for-like retail sales up 1% on last year and overall retail sales up 7% since the year end.
Paul Smith launched his first collection for men in 1970 and for women in 1994.