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Discounting hits margins at Moss Bros

Total sales edged up 0.6% at Moss Bros for the 23 weeks to 5 January but deeper discounting than planned post-Black Friday hit the retailer’s gross margin. 

Total like for like sales dropped 1% on 2017 but online sales performed well, up 27.8% on last year. Ecommerce sales comprised 16.2% of group revenue, up from 12.8% last year. The retailer said in-store sales underperformed as a result of reduced footfall. Hire sales, which account for less than 10% of group revenue in the period, were 11.2% lower than last year on a like-for-like basis.

Gross margins for the 23 weeks fell by 2.6% compared to 2017 as a result of increased promotional activity, particularly from late October onwards.

The group said it anticipates delivering a performance in line with current revised market consensus of an adjusted loss of £0.6m.

The business has fully resolved all of the stock issues it faced in the first half of the year.

Brian Brick, chief executive, 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.

“We remain debt free, with a strong balance sheet and are confident in our ability to deliver enhanced returns to our shareholders over the longer term”.

 

 

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