Shares in Moss Bros Group were down by more than 10% this afternoon (26 March) as the men’s wear retailer swung to a loss for the year ended 26 January on factors including lower retail store sales, weaker sterling and significant cost headwinds.
In its unaudited preliminary results statement, Moss Bros said for the 52 weeks, profit before tax totalled GBP4.2m (US$5.6m). This compares to a profit of GBP6.7m last year. Adjusted loss before tax was GBP0.4m.
Total group revenue, excluding VAT, was down 2.1% on the previous year at GBP129m, while group like-for-like sales of GBP140.2m, including VAT, fell by 4.3%. Like-for-like retail sales, including e-commerce, and like-for-like hire sales also tumbled, falling by 3.6% and 9.3% respectively.
E-commerce sales including VAT, however, were up 19.6% in the period and now represent 14.5% of total sales.
Gross margin, meanwhile, was 2.3% lower at 57.5%, due to both the impact of the weaker pound during the first half and the group’s proactive response to competitor discounting during the second half.
“It has been an extremely challenging year for the business on many fronts, but I am confident that we have made significant progress in a number of areas of the business. However, it is disappointing to be reporting an adjusted loss before tax for the Group for the first time since 2010/11,” notes CEO Brian Brick.
“As previously reported, we suffered from a combination of a significant stock shortage and extremes of weather, alongside sporting distraction in the first half, which impacted footfall into our stores. Whilst we were able to improve our performance in the second half of the year, this was in part as a result of adopting a more aggressive trading stance in reaction to competitor activity. We saw positive sales momentum during the fourth quarter, but as a consequence of deeper discounting, the gross margin rates which we achieved were lower than planned.”
Looking ahead, Brick says Moss Bros continues to anticipate an “extremely challenging retail landscape” particularly within its physical stores, as a result of reduced footfall and rising costs.
“Alongside the macro trend of more retail transactions moving online, we expect the uncertain consumer environment and significant cost headwinds to continue,” he adds. “In spite of the challenging backdrop, we have overall, made a good start to the new financial year. The early response to the 2019 spring/summer retail range has been positive and the continued progress of oure-commercee channel provides us with the confidence to increase investment in this area.”
Impending arrival of Joules CEO much needed
James Yacoub, retail analyst at GlobalData, believes that with the UK clothing market unlikely to see a significant upturn this year, the retailer must focus on showcasing its specialist credentials to better weather the storm.
“As many workplaces ditch formalwear in favour of more casual attire, suit retailers will continue to face challenges in maintaining sales growth,” he adds. “Operating in a tough retail environment and reporting a 7.4% fall in its like-for-like store sales, Moss Bros is struggling to differentiate itself from its competitors in creating a unique brand. Although it has almost completed its refit programme, its stores are drab and suit offerings are outdated, failing to demonstrate value for money to potential customers. Shoppers can turn down this unappealing offering in favour of an M&S suit which offers higher quality fabrics for a lower price.”
Former Joules CEO Colin Porter is due to take on the chairmanship at Moss Bros from May 2019, giving rise to hope that he may inject some of the Joules winning formula into the sinking Moss Bros model.
“Lifestyle brand Joules has benefited from a loyal customer base built up by offering a distinctive and consistent brand identity alongside attractive stores and has also successfully expanded its international presence,” Yacoub says. “Moss Bros should take inspiration from Joules and focus on creating a clearer brand image to draw shoppers back to the retailer.”
