Hobbs takes a massive hit in pandemic as margins plummet
Hobbs has filed its results for the year to the end of March and it's no surprise that they contain plenty of bad news. The premium womenswear retailer is known for its smart clothing and footwear, which were far from consumers’ priority lists in many of the months that this results report covers.
Turnover fell to £65.1 million from £133 million a year earlier and adjusted EBITDA was actually a loss of £1.6 million compared to a profit of £20.2 million in the previous period. The operating loss was £15.6 million, down from a profit of £7.6 million a year ago, and the net loss was £15.2 million, a significant reversal from the £4.3 million net profit it made in the previous financial year.
Unsurprisingly, the company said that the pandemic has had a "significant impact" on trading as social distancing measures and enforced temporary store closures weighed on its business. Restrictions both reduced demand for its core product categories that include dresses, occasionwear and officewear, as well as preventing consumers getting to its stores even if they wanted to. In fact the company lost 47% of its store trading hours during the 12-month period.
And even when it managed to make a sale, it was taking a hit to its margins. Hobbs said the headline gross margin for the year was 46%, down sharply from 60.3% a year earlier as it was forced into increased promotional activity and higher pandemic-related stock provisioning at year-end.
In the core UK market, it opened one store and three concessions and closed two stores and 22 concessions during the year. It also "successfully" launched one store and 13 concessions in international markets but closed two stores and 17 international concessions as well. The total number of outlets for Hobbs in the UK at the end of the year was 155, compared to 175 some 12 months earlier.
The brand had been "performing well" prior to the pandemic but clearly faces challenges today. The directors think that the principal risk is now “the pace with which customers shopping habits return as the world recovers”. It said the outlook remains uncertain and it's hard to predict the pace and strength of recovery. It expects a degree of homeworking is likely to remain for the foreseeable future — which could clearly dent its sales — but management is optimistic and believes there’s a degree of pent-up demand among its customers.
The company also added that it has benefited from the renegotiation of its covenant arrangements with its banks after the financial year ended and from its parent company, The Foschini Group, providing a further £15 million in funding to the UK business (TFG Brands (London) Limited) of which it’s part. That group also owns Phase Eight and Whistles.
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