Full-price strategy boost FatFace sales, US expansion continues
Increased full-price trading and an expanded store estate helped UK lifestyle clothing brand FatFace post a 2.4% increase in sales to £226.1m in financial year 2017.
The company was upbeat as it announced its full year results on Thursday. During the year to 3 June, it opened an 80,000 sq ft distribution centre in Dunsbury Hill Farm, which will help it improve efficiency as sales grow, and launched 10 new stores, including three in the US.
The business said it is “trading well” in the US, where it has also signed its first US store partnership with Von Maur, and where it now has 6 stores.
In the UK, sales for the 53-week period increased £4.1m to £219.5m, but growth would be relatively flat compared to a like-for-like period.
EBITDA was down 11% to £29.7m, but increased 0.9% on a constant currency basis, while operating margin also fell 1.9 percentage points to 4.7% as its operating profit felt the impact of currency fluctuations and the cost of its expansion.
The company invested £9.5m in a new distribution centre opening and in new channel expansion and trading partners, which will help it boost sales and enable its future growth plans.
Anthony Thompson, Chief Executive of FatFace, said: “In rapidly changing trading and currency environments, this result again demonstrates that FatFace is a resilient business. Trading momentum picked up in the second half of 2017 thanks in part to our policy of full price trading and has continued into the summer and autumn seasons where it has remained strong.”
“We continue to make significant progress with our group strategy, doubling the US store estate and moving into a new distribution centre at Dunsbury Park. These business investments will start to see a return in the coming year, when we will also launch a new web platform to support our multi-channel plans for growth.”
ECOMMERCE AND OUTLOOK
FatFace’s full-price policy increased its gross profit but had an adverse effect on the company’s e-commerce sales as a number of promotional offers were removed from the channel. Online sales fell by 3% during the year as a result of less discounting and now account for 17.2% of all sales, instead of 18.2% like last year. The company’s plan to launch a new website in the second quarter of the new financial year is expected to drive online growth and help the brand compete against rivals such as White Stuff and Joules, which are enjoying good growth online.
Despite the negative headwinds facing the UK retail sector, FatFace said it remains confident in its prospects for the current financial year.
“Whilst the current outlook remains challenging, FatFace’s continued focus on quality, design and price integrity, positions the business very well. We are therefore confident that the current momentum will continue during the all-important winter season,” said CEO Anthony Thompson.
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