• Moss Bros has booked a 6.1% decline in profit before tax for the full year. 
  • Total group revenue was up 3% on the previous year to GBP131.8m
  • The news comes a week after Moss Bros warned it expects profit for the year ending January 2019 to be at a level that is "materially lower than current market expectations".
CEO Brian Brick said there is "no question" the firm hampered its own position through the stock shortages

CEO Brian Brick said there is "no question" the firm hampered its own position through the stock shortages

The CEO of menswear retailer Moss Bros says the company is preparing for an "extremely challenging" retail environment in the year ahead, despite delivering a strong first-half performance in 2017.

For the 52 weeks ended 27 January, profit before tax totalled GBP6.7m (US$9.45m), a 6.1% decline on earnings of GBP7.1m last year. The company said this was driven mainly by lower footfall than anticipated during December, particularly in its brick-and-mortar stores.

Total group revenue for the period, excluding VAT, was up 3% on the previous year to GBP131.8m, while group like-for-like sales, including VAT, were up 1.6% on last year to GBP137.3m, and like-for-like retail sales, including e-commerce, were up 2.9%.

E-commerce retail sales for the year meanwhile, grew 13.5% on the prior year and now represent 12% of total sales. Moss Bros noted mobile and tablet sales showed strong growth and now represent 48% of total e-commerce sales.

Retail gross margins fell on the previous year by 1% as a result of the impact of the weaker pound, while underlying overall gross margin fell by 1.5% in the year, due to a combination of the impact of rising input prices as a result of the weaker pound and the reduction of hire sales within the firm's sales mix.

The news comes a week after shares in Moss Bros Group tumbled more than 18% after the retailer warned it expects profit for the year ending January 2019 to be at a level that is "materially lower than current market expectations".

Moss Bros shares fall amid profit warning

"It is frustrating that after a strong first-half performance, which continued into the third quarter of the year, the final quarter's performance was below the level we had forecast."

"It is frustrating that after a strong first-half performance, which continued into the third quarter of the year, the final quarter's performance was below the level we had forecast," said CEO Brian Brick.

"We suffered from a 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."

In spite of this issue, Brick added Moss Bros has continued to progress in the modernisation of its store portfolio, which is nearing completion, and develop its omni-channel shopping proposition, including a better level of customer segmentation.

"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," he said. "We will ensure that we continue to invest in this proposition to protect our position."

Looking ahead, Brick warned the business is planning for an "extremely challenging" retail environment, not least because of the uncertain consumer environment and significant cost headwinds.

"We expect macro conditions to continue to challenge us throughout 2018, however, we take confidence from early reaction to the new spring/summer 2018 ranges. We see the weaker trading environment as an opportunity to strengthen our core proposition compared to the competition and to utilise our strong balance sheet to invest."

Patrick O'Brien, UK retail research director at GlobalData, notes that on the face of it, these are impressive numbers for Moss Bros – after all, there are few clothing specialists declaring annual profits and positive like-for-like sales. However, the 12-month period masks some deeper problems which have come to light.

"In a profit warning in January Moss Bros blamed falling high street footfall for an 8% drop in sales in December, but followed this up last week with another warning – but for the current year – blaming a lack of stock for continued poor performance, after it consolidated supplier," O'Brien says.

"The supplier issue highlights a problem that many retailers are facing, where escalating costs, especially those driven by the devaluation of the pound, have led them to negotiate hard with suppliers to mitigate price increases that they know will be difficult to push to customers and protect their margins."

O'Brien warns this leaves investors with quite a lot of uncertainty. Bearing in mind Moss Bros blamed the original December sales fall on demand not supply, it is difficult to know to what extent demand may still be a problem, he says.

However, assuming it can arrest this decline, O'Brien notes the business is one of the stronger retailers on the high street, given its lack of debt, strong cash position and profitability.

But the longer term may prove difficult, given the consumer trend away from dressing formally. He adds with the firm's investment in its Tailor Me personalisation offer and e-commerce, GlobalData expects it to at least maintain its share of the formal menswear market, given the weakness of its mid-market competitors.

"But with like-for-like sales at its hire business falling 6.2% signalling the trend away from dressing formally, the longer term may prove difficult."