We’re extending our peak trading news in this very busy week for post-Christmas reporting. Here we’re covering today’s updates, which come from Moss Bros, AO World, Quiz and the Yoox Net-A-Porter Group. We’re looking all the while for what retailers are telling us not only about what’s happening to their businesses but for clues as to how shoppers are buying, and how that’s changing. We’re particularly interested in peak trading, when larger volumes of retail transactions take place, not only because it shows what’s happening now, but because it can also point to how consumer behaviour is changing in the longer-term.
Pureplay AO World, which operates AO.com in the UK alongside German and Dutch websites, appears to have benefited from consumers’ increased willingness to buy online - with November its biggest month ever. Group sales lifted by 8.2% in the third quarter of its financial year. Sales in the UK were up by a credible 4.4%, but its European sales were 31.3% ahead as shoppers bought over Black Friday. AO ran its UK Black Friday deals over a longer period of time than previously and says that customers responded well, with transactions taking place in a smoother fashion and at improved profit margins.
The retailer, ranked Top50 in IRUK Top500 research, now says that its full-year trading expectations remain on track.
AO World chief executive Steve Caunce said: "Against a challenging backdrop, Q3 represents a solid performance across the AO Group. We are on track with our plans as we continue to provide a great proposition for our customers. I am particularly proud of the hard work of the teams in the UK and Europe in this critical trading period which saw a record numbers of customers choose AO for their Black Friday and seasonal electricals purchases.”
In the last year Moss Bros, the formalwear and hire business ranked Top100 in IRUK Top500 research, has been challenged not only by falling store visitor numbers but also by stock issues as it consolidated its suppliers in the first half of its current year.
Today it said that those stock issues were now resolved, and sales improved year-on-year as a result. Ecommerce grew strongly – in line with wider trends that suggest customers are moving their spending online. Moss Bros joined the discounting that many retailers employed even after the Black Friday sale period ended in order to win a share of spending, and says its profit margins were hit as a result of cutting prices. It now expects to report losses of £0.6m in full-year trading.
Ecommerce sales grew by 27.8% in the 23 weeks to January 5, and accounted for 16.2% of all revenue - up from 12.8% last year, suggesting a shift online. Overall revenue, however, grew by 0.6% in total over the 23 weeks, lifting to growth of 3.8% over the first ten weeks of its fourth quarter - into January 2019. But profitability was down as gross margins fell by 2.6% compared to last year.
The retailer said it expects consumer demand to remain weak, but that it will invest in areas including ecommerce to make sure it continues to stay both relevant and competitive for consumers.
Chief executive Brian Brick said: “As I noted at the time of our interim results in September, we had already seen more intensive discounting from our competitors and this has continued throughout the period. Having originally sought to resist discounting pressures, we too have found the need to adopt a more tactical, discount-led pricing stance across all retail channels. Whilst this proved successful in delivering top line sales growth, there has been an expected negative impact on gross margin rates, which ensured that the group managed the level of terminal stock.
“Despite the improving trend in performance, we anticipate the period ahead will continue to be extremely challenging, as a result of the uncertain consumer environment, wider political backdrop and the significant cost headwinds that we continue to face from a weaker pound and further increases in business rates and employee related costs.
“We do however see the weaker environment as an opportunity to enhance our specialist market position and strengthen our core brand proposition, so we retain a sustainable point of differentiation.”
Fast-fashion retailer Quiz benefitted from the trend of online growth over Christmas - but not enough to save it from a dip in full-year profits. Ecommerce sales were up by more than a third (34.1%) in the six weeks to January 5 compared to the same time last year. That includes growth of 50.8% through its own websites. Store sales also grew, although by a more restrained 1.6%.
But while sales grew over the crucial Christmas period, that came after several challenging months, especially in November, and with higher than expected levels of discounting. Today Quiz, a Top150 retailer in IRUK Top500 research, said that its overall sales were running below current expectations of £133m for the year to March 31 2019, and that it expected profits to be lower as well, especially as it writes off £0.4m related to the House of Fraser administration, at around £8.2m.
Chief executive Tarak Ramzan said: “Against the backdrop of challenging trading conditions over recent months, Quiz has delivered further revenue growth over the Christmas period driven by the performance of our own websites. However, the growth and the margin achieved have been below our initial expectations and, consequently, the board considers it appropriate to revise its sales and profit expectations for the current year.
“We remain confident about Quiz’s long-term potential as an omni-channel fashion brand with a clear customer focus. Management’s utmost priority remains achieving further growth for the business and improving profitability in the future."
Sales at the online luxury fashion brands operated by Yoox Net-A-Porter Group rose fast in the Christmas quarter. Parent company Richemont said that sales at the business, and at watchfinder.co.uk, reported together, helped lift its sales by 25% for the third quarter of its financial year, to December 31. When YNAP and Watchfinder were excluded, sales growth fell back to 6% among the specialist jewellery houses and watchmakers that it also owns.
Richemont said that the fastest growth came in China, where sales rose in double digit percentages, but that compensated for Europe and the Middle East. Net-A-Porter and Mr Porter are both Top250 retailers in IRUK Top500 research.