Suit you, sir? Apparently not, at least for suit hire outfit Moss Bros Group plc (LON:MOSB) in December, which issued a profit warning on Wednesday.
Due to lower footfall than anticipated during December, particularly in stores, Moss Bros expects to report a full-year profit-before-tax performance within a range of £6.5mln to £6.8mln; the current median forecast among analysts who follow the stock is £7.27mln.
Tough trading conditions
The group said it expected tough trading conditions would continue for the foreseeable future and would have an impact on profits for the next financial year as well as this one.
The group said like-for-like (LFL) total sales for the 23 weeks to January 6 were down 0.1% year-on-year. Retail sales, including e-commerce, were up 0.4% on a LFL basis, thanks to a 12.3% increase in online sales; e-commerce now accounts for around of 13% of group revenue.
Although perhaps best known for its suit hire services, this part of the business only accounts for around one-tenth of group revenue, which is probably just as well, as hire sales were down 3.6% on a LFL basis in the first 23 weeks of the second half of the group's financial year., though this was a marked improvement on the 8.4% decline in the first half of the year.
More worryingly, gross margins were down 3.0% year-on-year, after falling 0.7% in the first half of the year.
Moss Bros: Get up to 70% off in the sale https://t.co/bJ5SDkXf77
— London Fashion Sales (@ldnfashsales) January 10, 2018
“We had expected to see greater retail store margin reduction during the second half, but given the tightly controlled buy levels for the Autumn/Winter season, the deepest level markdowns were avoided and we expect to close the half with a clean stock position; however, these store margin upsides have been offset by variances in other gross margin cost lines and the increasing mix of e-commerce and reducing mix of Hire within the half,” the group advised.
Brian Brick, the chief executive officer of Moss Bros, listed a number of headwinds the group faces in the year ahead: the uncertain consumer environment; wider political backdrop; and significant cost headwinds from a weaker pound, business rates and increasing employee-related costs.
“We see the weaker environment as an opportunity to strengthen our core brand proposition and to utilise our strong balance sheet credentials to invest,” Brick said.
Shares in Moss Bros were down 15.4% at 76.18p after an hour or so's trading.
Liberum said it plans to revise its forecasts after the disappointing update.
“We do note the cash on balance sheet as a positive and the group’s investment strategy in systems, IT and people is the correct one to continue with,” Liberum's Wayne Brown said.