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Moss Bros reports full-year pre-tax loss after shoppers bought more online but less from stores

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Moss Bros has reported its first pre-tax loss for eight years, after a year in which shoppers bought more from it online but paid fewer visits to its shops.

The mens’ formalwear retail and hire business, ranked Top50 in IRUK Top500 research, said that a “challenging year” had started with stock shortages in the spring, continued with falling store visits in the hot summer weather, and ended with deep discounting in the run-up to Christmas. 

Moss Bros reported group revenue of £129m in the year to January 27 2019, down by 2.1% on the same time last year. Like-for-like sales, including ecommerce, were down by 3.6%. In the previous year they had been up by 2.9%. The retailer reported pre-tax losses of £4.2m after one-off costs of £3.8m, including writing down the value of stores, and the cost of reorganisation. It said that earnings had been hit by lower in-store sales as well as the weakness of sterling and rising costs, from increases in the national living wage and minimum wage to the apprenticeship levy, business rates and rising purchasing costs. 

Ecommerce sales rose…

Online sales taken on their own grew by 19.6% to represent 14.5% of total sales. The previous year, ecommerce had accounted for 12% of sales. Just over half (52%) of ecommerce sales were made over smartphones and tablet computers: mobile saw strong growth in visitor numbers and conversion. 

The retailer sold on the Asos and Next third-party marketplaces as well as via its own website and said early customer response had been positive on both. The retailer is developing an online hire offer, with more customers now starting their hire journey online and completing it in store. Hire sales were 8% down on the previous year, and accounted for less than 11.5% of total revenue.

The retailer said increasing sophisticated use of technology had enabled it to understand how customers interact with the ecommerce site and tailor their experience as a result. “During the year,” said Moss Bros chief executive Brian Brick in the full-year statement, “we leveraged our improving understanding of each of our customer segments, both online and retail store dominant customers, to allow us to personalise interactions with them and to also offer communication appropriate to their needs and dependent on their purchase history. We continue to actively acquire new customers and focus attention on building on our existing customer repurchase behaviour, whilst reactivating those customers who have not visited for some time.”

…but store visits fell 

Store-only like-for-like sales were 7.4% down on the previous year, after rising by 1.2% the previous year. Sales were affected first by stock shortages in spring 2018, and then as store visits fell amid “abnormally cold and then abnormally hot weather” and England’s success in the World Cup. The retailer said that it was notable that its stores in the most high-profile retail locations underperformed as fewer people visited stores. 

Moss Bros sells from 129 stores, after opening two stores and closing one during the year. It said that its average store lease length was now 50 months to the end of the lease, or 33 months to the option to break a lease, and it is now looking to improve that to 24 months to a tenant-only first break. The retailer said that there was “an opportunity to reposition our store footprint on a selective and cost-effective basis, with good returns.”

Deep discounting

In the second half of the year, and especially after Black Friday, customers responded to deeper discounting in an “increasingly promotion-driven marketplace”. Profits were hit as a result of that discounting.

Brian Brick, chief executive, said: “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.”

He added: “Investment was focussed on both the physical store environment and new customer acquisition and retention, via our continually improving ecommerce platform.

“Looking forward, in common with many UK retailers, we continue to anticipate an extremely challenging retail landscape, particularly within our 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.

“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 our ecommerce channel provides us with the confidence to increase investment in this area.”

Moss Bros chairman Debbie Hewitt will be replaced by Colin Porter, chief executive of Joules, in May 2019. The retailer said it had developed Brexit contingency plans in the event that the UK leaves the EU without a deal. 

Read more about how Moss Bros has developed its use of analytics to understand online customer behaviour in our recent interview with head of ecommerce Matthew Henton. 

Image courtesy of Moss Bros

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