Friday 21 September 2018 8:43 am

Moss Bros issues profit warning, blaming World Cup for poor footfall

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  Shares tumbled at Moss Bros today as it issued a profit warning, blaming England’s World Cup success for fewer men being interested in buying suits.

The figures

The high street formalwear store posted a £1.7m loss for the six months to July, after recording a £3.7m profit in the same period of the previous year.

Store impairments cost it £1.2m of profit, while it sunk £800,000 into underperforming stores, a re-organisation and employee-related costs.

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The retailer saw total group revenue fall 3.3 per cent compared to the same period in 2017, as it took in £64.5m.

Like-for-like sales fell 6.9 per cent as footfall to its high street shops dropped, though online sales grew 9.5 per cent to represent 12.7 per cent of total sales.

Suit hires were also down 7.8 per cent, though it managed to generate a cash balance of £15.2m, down from £21.5m last year, for the half-year.

Shares plunged by over 17 per cent in early morning trading after losing around two-thirds of their value since last year.

Why it’s important

Moss Bros is the latest high street chain to feel the squeeze as shoppers ditch the high street in favour of ordering online.

French Connection yesterday fell to an operating loss of £5.5m, sending shares down despite eyeing profitability for the second half of the year.

Moss Bros blamed hot weather, combined with “the distraction of England's success at the World Cup”, for a seven per cent drop in footfall, while the worst-affected stores saw 14 per cent fewer shoppers.

The retailer claimed it would have made £2.7m more in sales had shoppers not been glued to their TV screens or in the park.

It did point to success in the form of its “Tailor Me” service, which it has expanded to almost every store as shoppers opt to customise their suits.

It opened two new stores despite the lack of footfall, and refitted three other outlets, to reach a total of 130 stores.

Like-for-like sales were down 3.7 per cent in the seven weeks to 15 September, it said, seeing an improvement from summer’s “extreme reduction”, while online trade grew 23 per cent.

It also pointed to positive responses to its autumn/winter range, despite a 13.3 per cent drop in hires early in the second half of the year.

However, it warned that its full year operating profit would be "materially lower" than the current expectation of £2.3m.


What Moss Bros said

Chief executive Brian Brick said:

"The first half trading performance was one of the most volatile for many years. We initially saw sales performance recover well following our previously highlighted early season stock shortages, and sales were generally ahead of expectation.

Read more: Heatwave hit retail footfall figures in August

“This came to an abrupt end when high street footfall dropped dramatically, impacted by the protracted and unplanned period of extremely hot weather and the widespread distraction of England's success in the World Cup. Although all retailers were impacted in some way, Menswear was specifically impacted negatively by the combination and longevity of these two external factors.

“Where a small number of our stores have underperformed against our expectations, we have decided to impair the carrying value of the related fixed asset. We believe it is right to be prudent in our assumptions, given the current trading environment, although we do have detailed action plans in place to improve performance in these stores.

“We remain acutely aware that the highly competitive retail landscape is set to continue, alongside an unpredictable economic backdrop and increasing cost headwinds. We have reviewed our expectations for the second half of the year despite having a number of key trading weeks still ahead of us and whilst short-term cost cutting would make us more certain of mitigating the footfall related gross profit shortfall and therefore hitting the market's expectations, we feel it would be detrimental to the long-term health of the business. As such, we have taken the decision to continue to invest and to deliver profit lower than expectations.”