Mountain Warehouse sales rise but profits dented by Covid and investment

By

Sandra Halliday

Published
Dec 15, 2022

Outdoor clothing retailer Mountain Warehouse has filed its results for the year to the end of February, and it's no surprise that the business was once again "significantly affected" by the pandemic.

But the company still came out ahead as far as sales were concerned, even if profits took a hit. Turnover during the year rose 26.1% to £302.6 million. Importantly, this was also 2.6% higher than the pre-pandemic year. 

Within this, retail sales grew 54.3%, despite Covid disruptions, although online sales fell 5% as physical stores reopened. But they were 63.3%, above the pre-pandemic period. International sales accounted for 29.6% of its total compared to 35.3% a year earlier.

Globally, the company had 368 stores at the end of the period, down from 379 stores 12 months earlier as it opened and relocated stores and closed some smaller locations (more of that later).

This translated into an operating loss of £102,000, compared to a profit of £7.9 million a year earlier. Net profit was £1.76 million, down from £5.5 million in the previous period.

The financial year had started with most of its stores being closed due to lockdowns, including all of its locations in the UK and Ireland. Its stores didn't reopen until April 2021 in the UK and until  May in Ireland, and while there were no major lockdown-linked closures after that, there were still short lockdowns later in the year in Germany, Australia, New Zealand and parts of Canada.

The company was also affected by global supply chain disruption that hurt both its sales and its costs. Sales were lower than expected due to delays to inbound stock, while elevated freight costs hit its gross margin. It was also affected by Brexit with costs through higher duty and delivery issues, alongside "friction to servicing" the group’s EU stores and its online customers.

And it added to its costs via the relocation of its primary UK distribution Centre, which in the long term should increase capacity and its opportunity for automation. 

With everything that was going on last year it's unsurprising that the group was affected by unusual spikes and reductions in demand. For instance, hiking, boots, camping equipment, and wetsuits saw "extraordinarily high demand" due to consumers taking ‘staycation’ holidays at home. But travel bags and large rucksacks saw reduced demand as international travel was muted.

Nonetheless, the company said it made progress against its strategic objectives to ensure it's well placed for future expansion. And it accelerated its online growth by expanding its product range, acquiring the Animal brand and by other general investment. 

As mentioned, it also continued its transformation to larger store concepts, opening or relocating 10 stores during the year, while reducing rental costs and adding flexibility to leases through 49 lease renewals during the period. It said bigger, out-of-town stores are more appealing to customers as it can offer a wider product range.

With the 2023 financial year now well under way, the company said it’s confident its strategy will lead to a recovery in profitability. That strategy includes expanding its range of products for online customers and launching a marketplace for third-parties to sell on the Mountain Warehouse website with the group taking a commission on those sales.