Moss Bros shares hit on shock profit warning
The group became the latest retailer to alert over earnings after difficult festive trading, while it also warned 2018 profits are set to be hit.
Menswear retailer Moss Bros saw shares slump after it warned over profits following a “very tough” December.
The group became the latest high street player to alert over earnings after difficult festive trading, while it also warned 2018 profits are set to be hit in an “extremely challenging” year ahead.
Shares plunged as much as 22% at one stage before settling around 16% lower after the gloomy update, which follows recent profit warnings from department store chain Debenhams and Mothercare.
Moss Bross said like-for-like store sales had slumped 8% since the start of December amid lower-than-expected footfall in shops and intense competition on the high street.
It saw overall retail comparable sales edge 0.4% higher in the 23 weeks of its second half to January 6 thanks to a 12.3% leap in online sales and a better performance in stores between August and November.
But the poor trading over the crucial festive period means it now expects full-year profits for the year to the end of January to come in slightly below market expectations, at between £6.5 million and £6.8 million.
It added that profits for 2018-19 are also expected to be impacted as it plans to continue investing in the business in the face of ongoing high street woes.
Brian Brick, chief executive of Moss Bros, said: “We faced a very tough December trading environment, which led to a significant reduction in store footfall and a hardening of the corresponding competitive environment in which we operate.”
He added: “In common with many UK retailers, the year ahead looks like being an extremely challenging one, not least because of the uncertain consumer environment, wider political backdrop and significant cost headwinds we face from a weaker pound, business rates and increasing employee related costs.”
But he said investment in the group was vital to “protect our position”, although this will “inevitably impact anticipated profits for full-year 2018-19”.
It also saw another fall in like-for-like suit hire sales, down 3.6%, although this marked an improvement on the 8.4% slump seen in the first half of its year.
Moss Bros said it resisted the “deepest level of markdowns”, but profit margins still fell 3% over the 23 weeks as it was also knocked by higher buying costs from the Brexit-hit pound and costs of growing its online arm.
Mr Brick said the poor December trading was “frustrating”, given recent efforts to turnaround retail sales and its hire service, and bolster online business.
Richard Lim, chief executive of Retail Economics, said: “This profit warning highlights the continued challenge for apparel retailers who are battling against an acceleration in structural changes sweeping through the sector.
“Burdened with too many stores, inflexible leases and spiralling operating costs, the shift towards online spending is putting profit margins under intense pressure.”