The hoodie designer expects full-year store sales to remain under pressure, wholesale to improve from current levels while e-commerce is set to benefit from the continued channel shift arising from social distancing measures in stores.
After resorting to heavy discounts to clear out stock, the retailer expects a hit on gross margin but costs will be “substantially” lower thanks to rent renegotiations, savings in logistics, a substantial reduction in bad debt expense and cuts in discretionary spend and payroll.
As part of its turnaround plan, the faux-Japanese clothier looks to “return to a design-led philosophy” and bring the store portfolio to profitability, as well as investing in the digital channels.
In the 20 weeks to September 12, group revenue slipped 27% compared to last year, but performance in August and September worsened compared to June and July.
Stores and wholesale revenue dropped by 48% and 35% respectively, while online shot up 55%.
Europe only saw a 32% dip in the period while sales in the UK and the US fell 55% and 75% respectively because they reopened later and still have a small number of stores closed.
In the year to April 25, revenue slipped 19% to GBP704mln while the statutory loss before tax widened 87% to GBP166mln. The board did not propose a dividend.
Still a ‘buy’ for Liberum
“The current market cap of GBP125m is now smaller than the value of the inventory (c.GBP158m) on the balance sheet,” analysts at Liberum commented, adding the results were as good as could be expected considering the COVID-19 impact.
“This has to be wrong considering momentum and the proven track record of this management to convert this into cash.”
Shares lost 11% to 135p on Monday morning.
–Adds analyst comment–