Paul Smith loss narrows as sales bounce back, e-tail and forward orders are strong
Paul Smith's results for the year to the end of June, show a “pleasing” recovery from the effects of the pandemic, reflecting both the benefits of the “mitigating steps” taken during the Covid crisis, and increased demand for the products since the situation eased.
The company also showed a steady progression in both store and e-commerce sales with the latter now a significant channel for the business. And each season since Covid restrictions eased has been one of progress to the point that it’s now ahead of the pre-pandemic seasons on some metrics.
The figures for Paul Smith Group Holdings Limited — the ultimate holding company for all of the activities under the Paul Smith umbrella — show that the business has “recovered strongly”. But it said that in common with other retailers it “continues to face challenges, including the impact of rising inflation, and low consumer confidence”.
Looking at the headline figures, group turnover during the financial year increased by 22% to £197.35 million. The gross margin also improved as a result of higher volumes, stock efficiencies, and more sales at full price as pandemic restrictions were dismantled.
Gross profit at the business was £99.2 million, up from £77.9 million a year earlier, and it made an operating profit before exceptional items of £5.6 million, better than the £3.1 million loss of the previous period. The company managed an operating profit of a little over £4 million once exceptional costs were included, which was good news compared to an operating loss of £12.1 million a year earlier when it had been affected by significant one-off costs.
And while the company made a net loss overall for the year, at £3.6 million, it was much lower than the £18.8 million loss in the prior 12 months. The group also ended the year in a strong cash position.
Looking in more detail at some of the figures, retail sales for the year increased by 35% overall and by 41% on a like-for-like basis, as it benefited from increasing footfall due to shops being open for most of the period.
Retail sales for AW21 were up 36% compared to the previous AW season and they rose 35% on a like-for-like (LFL) basis. However, they were 6% down (LFL) on the pre-pandemic autumn season.
Meanwhile, SS22 retail sales were up a healthy 49% on the previous year and up 41% LFL. Significantly as well, they were also up 1% compared to SS19.
Paul Smith added that it's slowly seeing further improvements in footfall with overall retail sales for AW22 so far up 11% on last year, although down 5% on AW19 LFL. Within this, e-commerce sales are down 11% compared to AW21, but the company’s investment in online selling during the pandemic is clearly paying off as these sales are 47% up on AW19.
Even with all of the company’s shops now open, direct e-commerce sales during the latest year added up to 34% of its retail sales. That was down from 51% in the previous financial year, which is understandable given that it had received an artificial boost back then as the shops were shut for much of that earlier period.
E-commerce is a major channel for the business today, and it said its momentum is set to continue based on current trends and continued investment in both its digital capability and digital marketing activity.
It also added that it's seeing some “very encouraging” signs of growth, particularly in its tailoring categories, as well as increasing footfall in some of its larger shops as customers return to city centres.
That said, it has continued to review and refine its stores portfolio and has closed a location in Birmingham, UK and one in Paris, France. But it opened one in Williamsburg, New York and relocated a Hong Kong location to IFC mall.
As for wholesale, the latest 12 months also saw a recovery, with the company’s wholesale sales to franchise partners, to leading department stores, selected multi brand physical shops and e-tailers globally increasing 12% to £82.6 million.
In fact, its wholesale business was "resilient" throughout the pandemic, and it has continue to perform well in terms of deliveries and sell-through. Forward orders confirmed since the year end for SS23 are up 4% on SS22 and are even 1% higher than SS20, which was the final forward order season before the impact of the pandemic was felt on such orders.
One issue, however, is that the recovery continues to be uneven across geographies. But the firm has continued to successfully manage its stock levels, despite what it said has been “erratic and uncertain” demand.
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