Reiss profits dip on expansion spend but sales grow at home and abroad

By

Sandra Halliday

Published
Nov 1, 2017

Reiss reported lower operating profits for the year to this January but it doesn’t look like there’s too much to worry about as the company was investing heavily in its expansion strategy and that’s what caused the dip.

Profits dropped to £15.2 million from £17.3 million and the operating margin fell from 12% to 9.2%. But sales rose by 13%  to £145.2 million as the company opened new locations in the US, Canada and Australia and also launched its new e-tail platform.

That gave it 179 stores in 17 countries in the latest year, up from 160 a year earlier.

The results cover the period before ex-Next product director Christos Angelides became CEO (he joined in February) but the company said with the results that it “continues to grow and develop, benefitting from our excellent product offering together with domestic and international expansion.”

It added: “With a new chief executive in place and a strengthened management team, we look forward to continuing to invest in the business in order to position it for further growth and development.”

It didn’t give a current-period trading update, which is a shame but what did analysts make of the figures it did share? GlobaData’s Charlotte Pearce said she expects growth to continue “with its share of the UK premium clothing market forecast to rise 0.2 percentage points to 3.1% in 2017.”

With the UK premium clothing market set to grow 21.6% up to 2022, outpacing the total UK clothing market, she added that "Reiss is in a prime position to benefit ,with strength in both menswear and womenswear.”

Analysts rate Reiss highly with the company having razor-sharp focus on its target customer and products that are clearly differentiated from the rest of the market that help to justify its higher price points. But Pearce said that “the premium market is competitive” and Reiss must be careful to “maintain relevance” under the direction of Angelides.

One thing is clear, it has the investment cash it needs to fund its expansion. The company sold a majority stake to private equity major Warburg Pincus last year and this has helped to fund its growth.

It has also helped with its new e-tail platform and this is very important as, despite the overseas growth, most of its sales still come from the online-focused UK market.