Nov 1, 2021
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Matchesfashion losses widen, but recovery seems to have started

Nov 1, 2021

Matchesfashion’s auditor has included a going concern warning in the firm’s latest set of accounts as the company works its way back from the battering it took during the pandemic and faces financial covenant deadlines in January.


But the company has also said it’s talking regularly to lenders and is confident about a positive outcome. The luxury retailer also cited the ongoing support of its backers and that it has a number of options if its covenants are breached.

Recent trading improvements as social life restarts, and the news of Paolo De Cesare’s appointment as CEO, also suggest events are moving in the right direction. De Cesare is unlikely to have signed up for a business in danger of closure. 

The accounts — filed at Companies House and covering the period to the end of January this year — showed just how hard hit the business was by a series of lockdowns that were still ongoing at the time the reporting period ended.

The company's revenue in the latest year fell to £392 million from £433.8 million a year earlier and gross profit was down to £122.3 million from £163.4 million. The operating loss widened to £34.7 million from £3.7 million and the final net loss for the company was £36.5 million, after a net loss of £5.89 million in the previous year.

It's clear that the pandemic was a major challenge for the business as it distorted the customer behaviour it had expected, which in practice meant lower demand for upscale clothing associated with events and social gatherings. That said, categories more suited to working from home or generally being at home saw increased demand.


However, supply was also delayed due to the pandemic, leading to new products being received later than expected. The company worked closely with its brand partners to mitigate the impact of this. But it said that “seasonal full-price selling windows were ultimately compressed, which placed pressure on margins”.

Margins would also have been affected by the fact that the group started the year with high inventory levels and, combined with the disruption of Covid, it meant management had to take specific action to reduce the level of finished goods available for resale and to target higher levels of in-year sell-through through markdowns. 

Inventory levels at the end of the year were reduced to £79.6 million from £144.2 million in the previous year. But sell-through rates did increase to 93% from 90% for the spring/summer season and to 81% from 75% for the autumn/winter season.

It’s no surprise, therefore, that as mentioned, the company’s auditor PWC included the warning that under both Matchesfashion’s ‘base case’ and ‘downside case’ assumptions, it’s at risk of breaching its banking covenants in January next year. And PWC said there’s a “material uncertainty” over its ability to continue as a going concern without an improvement in trading.

But that improvement does seem to be happening. The firm’s confidence that it can find a solution in its talks with its lenders comes as fashion retailers from the value segment up to the luxury sector report strong demand for ‘going out’ clothing, accessories and footwear. And it also comes as the commitment of backer Apax to the business is clear from the fact that it has pumped £85 million in financing into the firm in recent periods.

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