Moss Bros falters at Christmas, profit to be lower than expected

By

Sandra Halliday

Published
Jan 10, 2018

Moss Bros stayed upbeat this week despite what has clearly been a challenging few months for the menswear specialist.

But it’s forecasting further challenges this year after December and its second half were far from the stellar trading periods it might have hoped for.

And that meant a profit warning with the firm saying that it expects to report a full-year pre-tax profit somewhere between £6.5m and £6.8m, which is slightly below current market expectations.

So what’s been happening? For a start, without issuing a specific Christmas trading update, it said that December footfall was weak. This meant that while it continued to “make progress” in its second half (the 23 weeks to January 6), and sales did rise, that rise was fairly anaemic.

Total group sales were up only 1.1% while total retail sales, including e-tail, rose 1.6%. Comparable physical store sales fell 0.1% but they rose when e-tail was included, albeit only by 0.4%. 

Retail makes up 90% of the firm’s revenue with hire revenue only accounting for 10%. E-tail is becoming a more important part of its total but isn’t growing as fast as some UK retail peers. E-tail sales in the 23 weeks rose 12.3% and now make up 13% of the total. But that’s still a small percentage, hence the inability of e-commerce to significantly boost the comp sales figure.

Hire sales fell 3.6% on a comparable basis in H2, but they improved compared to the first half.
 
And the overall gross margin for the half dropped 3%, having fallen only 0.7% in H1. In fact, the company expected the margin drop to be bigger but controlled its markdowns.
 
Clearly the Christmas performance was a big contributor to the weak figures and comparable sales in December and January fell 8%.

CEO Brian Brick talked about a “disappointing year-end shortfall”. He added: “We faced a very tough December trading environment, which led to a significant reduction in store footfall and a hardening of the corresponding competitive environment in which we operate.”

He cited the “uncertain consumer environment, wider political backdrop and significant cost headwinds we face from a weaker pound, business rates and increasing employee related costs.”

But, as mentioned, he stayed upbeat: “We have a strong consumer proposition and our ambition remains to be the first choice for men's tailoring and we are determined to ensure that we continue to invest in this proposition to protect our position. We see the weaker environment as an opportunity to strengthen our core brand proposition and to utilise our strong balance sheet credentials to invest.”