Jack Wills sales dip, but margin fall turns profits into a loss
Struggling fashion retailer Jack Wills filed its full-year results this week and while they only covered the period up to January 28 last year, they did show just how much of a challenge the company has been facing. But it also later told us that its situation has improved in more recent periods.
Jack Wills said that turnover fell by 1.1% in the 12-month period, dropping to £129.3 million, which may not seem too bad against what it said was the “backdrop of a challenging year in the retail sector generally, with consumer finances continuing to be constrained.”
However, a slight sales dip wasn't the end of the story and the company also said that its gross margin earned on sales fell quite sharply to 50.98% from 55.87% a year earlier. That meant that the company’s earnings before interest, tax, depreciation and amortisation (ebitda) before exceptional items turned into a loss of £7.5 million, much worse than the profit of £6.3 million a year earlier.
The marginal sales increase also came despite the fact that the company opened 12 new stores during the year, closed only one location and “refined” another three.
But while the results themselves didn't include any more recent updates, after they were filed, Jack Wills did issue a statement, telling Fashion Network that "it is true that 2017/18 was a challenging year but the business has moved on significantly since then. The improved processes and tighter financial disciplines we have put in place helped halve the ebitda loss for 2018/19.
“Looking forward, Jack Wills recently completed a significant refinancing, with continued support from our major shareholder, BlueGem. This puts us on a firm footing as we seek to return to sustainable growth by improving our product range and re-engaging with customers via the right channels.”
Analysts hadn't been impressed by the earlier figures with Emily Salter, of GlobalData, saying that “the logo and the characteristic navy blue and pastel pink colours of the brand no longer hold appeal for consumers aged 16-24 as they once did, and similar items can be bought for a fraction of the price elsewhere. Instead, streetwear-focused brands are more desired, such as Champion and Supreme.”
Salter said that “brands that are reliant upon a limited signature style are not sustainable in the long-term, so Jack Wills must evolve otherwise these demand issues will continue.”
There's no denying that the company is working hard to evolve and transform its fortunes with initiatives such as opening outlet stores, seeking to offload high-cost locations, and the Bear coffee bar concession that will open in its flagship Soho store this spring.
But while this latter move may increase dwell time among existing shoppers, GlobalData’s Salter thinks it’s “unlikely to attract additional consumers due to the high number of existing independent coffee establishments in the area.” She said Jack Wills is entering a fashion-to-food area that others such as H&M, Primark and Next already occupy and “more drastic changes will be needed to take place to protect the future of the brand.”
With former Debenhams exec Suzanne Harlow now installed as CEO after Peter William's departure last year, we must assume that more changes will be forthcoming so watch this space.
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