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Published
Mar 27, 2018
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Moss Bros new year starts slowly but momentum is returning

Published
Mar 27, 2018

Last week it issued a profit warning and on Tuesday we found out just how bad 2017 was for menswear retailer Moss Bros. The company reported its unaudited preliminary results for the 52 weeks to January 27, but they weren’t quite the wipeout we might have been expecting. 


Moss Bros



Yet it also said that current trading its tough. As mentioned last week, Moss Bros has “suffered significantly from the stock shortages caused by the consolidation of key suppliers,” and while it expects these issues to be resolved by late spring, for now, trading is being hurt.

Retail comp sales, including e-tail, are down 6.7% in the first eight weeks of the financial year, and although this shows a slight improvement of the trend reported in January, “the recovery we anticipated has been significantly hampered by the stock shortages.”

E-tail sales in the first eight weeks have risen by only 4%, “also substantially impacted by availability,” while comps in the hire unit have fallen 4.9%.

But the company said the “early responses to the Spring/Summer 2018 ranges across Retail have been positive and as stock has now started to build we are seeing better sell-through rates come through.”

THE NUMBERS

In its last year, group revenue (excluding VAT) rose 3% to £131.8 million, and comparable sales (with VAT included) rose 1.6% to £137.3 million. However, comps had been up 5.3% in the previous year so that was a marked slowdown.

Comparable retail sales including e-tail rose 2.9% (lower than the 6% of a year ago) and comparable hire sales fell 6.2% after rising 1.5% in the previous year.

Clearly, those figures aren’t great, but they’re not a disaster in the current climate either. And there was some even better news as e-tail sales including VAT rose 13.5%. They had risen 15.7% a year ago to make up 11% of the total, but the slightly smaller rise this time means they now contribute 12% of total company sales. And sales via smartphones and tablets raced ahead to now account for 48% of all e-tail turnover.

But here’s the worst news - pre-tax profit (which is what it’s all about, after all), fell 6.1% to £6.7 million, although at least the company isn’t making a loss. The firm’s profit on an Ebitda basis looked a bit better as it fell only slightly to £13.3 million from £13.6 million, driven by “increasing sales, continued tight control of costs but affected by the impact of significant cost headwinds.”

The gross margin was 1.5% lower at 59.8%, due largely to the impact of the weaker pound but the company said it has an ongoing strong cash position of £17.5 million “through close management of working capital and after a further £8.5 million capital investment across the business.”


Moss Bros


What were the main headwinds that dented last year apart from the weak pound and its supply issues? The company said that it saw “a tough end to the year, with poor December footfall,” which is what dealt a blow to so many of its retail peers in both the men’s and womenswear sectors.

But it benefitted from ongoing investment in product, and development of sub-brands such as Moss London, both at home and on international marketplace sites. And e-tail certainly made progress with Moss Bros saying it’s “starting to personalise the interactions that we have with our customers, which delivers more targeted campaigns.”

Its 'Tailor Me' custom tailoring service also increased in volume and value, while store refits and new store openings “continue to improve the quality of our store estate.”

FRUSTRATION

But there's no denying that the weak start fo the new year and the weak end to last year are bad news and the company can only blame itself to a certain extent.

CEO Brian Brick said all of this is “frustrating” and blamed the problems on the “significant stock shortage, due to the poor implementation of the project to consolidate suppliers. We left ourselves with too little 'running line' stock to close out the year having bought cautiously for the second half of 2017. This has continued to hamper our performance into the start of the year.”

But he added that "in spite of this issue, we have continued to progress the modernisation of the store portfolio, which is nearing completion and develop our omnichannel shopping proposition, including a better level of customer segmentation.”

And he said the firm is “planning for an extremely challenging retail environment, not least because of the uncertain consumer environment and significant cost headwinds. However, there is no question that we have hampered our own position through the stock shortages and as this gets back on track, our strong consumer proposition is restoring momentum. We will ensure that we continue to invest in this proposition to protect our position.”

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