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Missguided returns to profit but reports falling sales after lower marketing investment

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Missguided cut costs to return to profit in its latest year, but missed out on online sales as its brand awareness fell. 

The fashion retailer, ranked Top150 in IRUK Top500 research, dealt with inventory management issues from the previous year and cut costs during the year to return to pre-tax profits of £3.5m before interest and one-off costs, from a loss of £26.3m the previous year.

But cutting back on marketing investment hit brand awareness and online sales suffered as a result. Wholesale sales via partners that did invest in marketing grew strongly, meanwhile – but that did not compensate for the shortfall in revenues and sales came in at £186.9m in the year to March 31 2019, down from £215.9m the previous year. Missguided took the decision to close its two stores, in Westfield and Bluewater as a result.

Since the end of the year, Missguided’s trading performance has improved. “The current trading trajectory gives us confidence that we will deliver a year of profitable growth in FY20,” it said in its full-year statement. The core channel of ecommerce is back into positive like-for-like sales growth whilst also delivering improved margins. Wholesale is continuing to perform ahead of expectations and initial results from the recently launched franchise channel are encouraging.”

Commenting, retail analyst Sofie Willmott of data and analytics business Global Data said: “A £29m slump in sales to £186.9m demonstrates how fashion-focused, primarily online retailer Missguided lost its way in FY2018/19 and let its more adaptable and hungry rivals swoop in and steal shoppers in the competitive, fast moving online clothing market. 

“With online pureplays such as Oh Polly, In The Style, Nastygal and MissPap becoming more well-known amongst their young target customer base, Missguided was foolish to cut back on marketing spend and it will be difficult to win shoppers back following a quiet year. Although cutting costs has led to a much lower operating loss in FY2018/19 compared to the previous year, investment is required if Missguided is to achieve sales growth in FY2019/20.

“As well as reduced investment, Missguided also put its poor performance down to mismanagement of inventory which left the company with ‘excess aged stock’. Given that online-focused retailers do not have a large portfolio of stores to fill (Missguided had just two branches for most of the period) and visual merchandising to consider, Missguided should have been able to operate on fast covers and should not have got into this position. Since identifying this as a major issue, Missguided has focused on shorter lead times and reacting more quickly to both good and bad performing lines, making quicker trading decisions which will improve both its performance and margins in FY2019/20.”

Image: Fotolia

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