Oct 22, 2020
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Tough year for Leeds Group as competition and Covid hit sales, earnings

Oct 22, 2020

Anglo-German textiles firm Leeds Group blamed strong competition and the Covid-19 pandemic for a “difficult” trading year, especially in the final quarter.

Leeds Group/Hemmers

The group makes textiles used by home dressmakers, but also by small designers and other small apparel businesses. 

Group revenue for the UK-based business fell to £35.07 million in the 12 months to May 31 from £38.9 million a year ago, as pre-tax losses grew to £2 million from a loss of £1.3 million last time. The operating loss from continuing activities also grew to £1.75 million from a loss of £1.05 million.

Trading conditions for its Hemmers and KMR operations were also described as “challenging” with Hemmers particularly facing “intense” competition both domestically and internationally.

“Although the German government provided financial support, the reduced sales figures did not produce enough contribution to cover the fixed overheads and therefore both Hemmers and KMR made losses for the year,” it explained.

Chairman Jan Holmstron said: “It has been a difficult year for the group. Trading conditions have been challenging within both the wholesale and retail textile markets due to increased competition and pressure on prices. In addition, the Covid-19 pandemic affected trading for the last three months of the financial year".

He said its Hemmers-Itex Textil Import Export and Stoff-Ideen-KMR businesses were "considerably restricted" from March when the German government imposed a country-wide lockdown in response to the Covid-19 pandemic.

“Hemmer’s wholesale business was affected by the imposed lockdown and KMR’s retail shops were closed from mid-March to mid-April 2020". He added: “The directors have implemented a number of cost-cutting measures, identified through a strategic review undertaken last year, to refocus on our core business and ensure the Group has the appropriate infrastructure and cost base aligned to its sales levels".

On a brighter note, Holmstron added: “Even though the Covid-19 situation is still impacting the marketplace, sales levels for Hemmers and KMR in the first few months of the new financial year have been better than expected. The directors are confident that both businesses are better prepared to mitigate this risk and should benefit again from any government financial support.” But he also warned further local or country-wide restrictions “would again affect trading”.

By division, the Hemmers wholesale business sales for the year were “significantly lower" than last year, falling to £27 million from £30.9 million a year ago. It noted the market in Germany had fallen "considerably" during the year and Hemmers has also been under increased price pressure from competitors. The gross contribution percentage fell to 31% from 36% a year ago, "due to the pressure on pricing through competition".

It said Hemmers is now focused on growing its domestic and international wholesale markets with a more customer-focused sales strategy. “We are confident that Hemmers will be in a much better position to compete in the global marketplace next year to regain lost market share", it added.

Meanwhile, its Germany-based KMR retail business saw sales fall marginally to £8 million from £8.6 million, although gross contribution percentage increased slightly to 53% from 50% a year ago. 

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