Moss Bros sales edge up but margins are under pressure, co stays upbeat
today Jan 11, 2019
Moss Bros hasn’t had an easy time of it lately but while that meant we might have expected further pain from the menswear specialist in what has been a very difficult season for the fashion sector, its trading update on Friday wasn’t that bad. It wasn’t that good either, however, fully reflecting the challenging times in UK fashion retail at the moment.
The company said that the 23 weeks since July 29 saw it continuing to “make progress in a tough marketplace, having fully resolved all of the stock issues that the business faced with its supplier consolidation in the first half of the year.”
Total sales improved year-on-year, although only by 0.6% and the like-for-like figure was down 1.1%. Total retail sales, including e-commerce and wholesale (but excluding its hire business), comprised 91% of group revenue during the 23-week period and were up 1.9% vs the same period last year with a 0.1% uplift on a like-for-like basis. The hire operation that was once the cornerstone of the Moss Bros business continued to decline.
But there was “an improving trend in the fourth quarter,” with the 10 weeks to early January seeing total sales up 3.8%.
However “the period post-Black Friday required deeper discounting than planned, in order to remain competitive, with gross margin rates impacted.” Gross margins were down by 2.6% due to promotional activity.
Physical stores, notably those in the most high-profile retail locations, “underperformed as a result of reduced customer footfall.” But more positively, the “strong momentum” of its e-commerce channel saw its sales rising 27.8%. E-tail now accounts for 16.2% of sales, up from 12.8% a year earlier.
The company expects to deliver “performance in line with current revised market consensus of an adjusted loss of £0.6 million.”
CEO Brian Brick said that despite the improving trend in performance, “we anticipate the period ahead will continue to be extremely challenging, as a result of the uncertain consumer environment, wider political backdrop and the significant cost headwinds that we continue to face from a weaker pound and further increases in business rates and employee-related costs.”
But he added that he sees the weaker environment “as an opportunity to enhance our specialist market position and strengthen our core brand proposition, so we retain a sustainable point of differentiation.”
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