Fat Face adjusts debt as profits come under pressure

Alys Key
Follow Alys
Despite bracing for a weaker sterling, Fat Face continues to expand its store presence (Source: Michael Taylor)

British clothes retailer Fat Face has negotiated easier debt terms after its profits slumped due to the weakened pound.

In a full year report posted on Friday, the company's directors confirmed that they had completed a “covenant reset” to an external financing agreement to secure greater “headroom”. They said this was a direct result of the UK's decision to leave the EU and the subsequent devaluation of sterling.

Last year saw the company's pre-tax annual profits fall 9 per cent from £24.2m to £22m, despite a 7.2 per cent rise in revenue to £220.2m.

The decline in profits was primarily attributed to rising costs associated with currency pressures. Fat Face purchases product from the Far East in US dollars, leaving it vulnerable to the fluctuations in the exchange rate.

However, the company also invested £1.2m in boosting advertising and brand awareness, which also contributed to rising costs.

Despite the slip in profits, the brand continued to increase its bricks-and-mortar presence, opening 10 new stores and increasing overall square footage by 11.8 per cent through extensions, relocations and new openings. There are currently 225 Fat Face stores and the company plans to grow its UK property even more in the coming year.

But the results also showed the growing importance of ecommerce to the brand, with online sales up 20.6 per cent year on year. This means it now accounts for nearly 1 in 5 (18.2 per cent) of Fat Face's total sales.

Fat Face said they would push a multi-channel approach going forward, in recognition of how many consumers are using both the stores and the website in conjunction. Mobile technology was pinpointed as a target for further investment, as 66 per cent of FatFace.com browsers did so through their mobiles in the past year.

Related articles