Moss Bros has loss-making 2018 but stronger start to new year
Moss Bros didn’t have much good news on Tuesday as it reported its annual results up to the end of January. The company which describes itself as the “first choice for men's tailoring” (in a world where menswear is becoming increasingly casual), reported lower sales and was loss-making.
It reported total group revenue excluding VAT down 2.1% to £129 million. Group like-for-like sales including VAT were down 4.3% at £140.2 million. Like-for-like retail sales including e-commerce dropped 3.6% and like-for-like hire sales fell a hefty 9.3%. And the one piece of good news? E-commerce sales including VAT rose a very strong 19.6% and now make up 14.5% of the total.
But that's where the good news ended. The company reported an adjusted loss before tax of £0.4 million, down from a restated profit of £6.7 million, and a statutory loss before tax of £4.2 million after adjusting items of £3.8 million. Adjusted EBITDA was £6.6 million, down sharply from the restated figure of £13.3 million a year ago after being impacted by lower retail store sales, weaker sterling and “significant cost headwinds.” But the company said that “mitigating actions have been taken and are gaining traction.”
It was an undeniably “challenging year” with the first half heavily affected by early season stock shortages that caused significant trading issues. These were fully resolved by April, but “footfall was then significantly impacted by a combination of abnormally cold and then hot weather and sporting event success distracting customers from shopping across the summer.”
Was there any better news in H2? Not really. The second half of the year had its own set of issues, which was a good illustration of how retailers need to assume that such issues will be happening year-round and so they can’t really get away with blaming them.
In the final six months of the year, Moss Bros was affected in particular by the need to discount heavily. Although it saw “positive customer responses to deeper discounting as we actively sought to ensure we maintained our 'share of voice' in an increasingly promotion-driven marketplace” after Black Friday, profit was understandably hurt.
The company talked up the “benefits that were realised from ongoing investment in driving its e-commerce channel, through increased personalisation and more targeted customer acquisition and retention programmes." It said that “e-commerce channel performance now contributes materially more to overall revenue than the prior year.”
Also on the positive side, it said that the Tailor Me custom tailoring service increased in volume and value in [its] stores” so there clearly is still a place for tailoring in this casual world. And it continues to “grow the presence of Moss own brands on online retail marketplaces.”
But it stressed that “the UK retail environment continues to be highly volatile with the combined challenge of weak consumer demand and substantial external cost headwinds.”
That said, trading performance has strengthened overall in the first eight weeks of the new financial year, with total sales up 3.6% on last year, “driven by growth in e-commerce and wholesale channels and the benefit of no recurrence of last year's stock issues.” That last point is particularly significant because it means we have to take into account the fact that the comparisons with last year are particularly easy.
Retail like-for-like sales including e-commerce and VAT, in the first eight weeks are up 3.9% and e-commerce sales, including VAT, in the period have accelerated even further with a 20.1% increase.
However, hire like-for-like, reported on a 'cash taken' basis, is down 13.4% and hire sales “continue to be challenging, although Hire peak season is still to come.”
But CEO Brian Brick said he’s “confident that we have made significant progress in a number of areas of the business. However, it is disappointing to be reporting an adjusted loss before tax for the group for the first time since 2010/11.”
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