Aspinal of London, the luxury accessories brand, has announced that its losses have widened in the year ending March 2020. Despite this, the company remains optimistic about its future profitability as it undergoes a strategic shift towards online operations.
According to the financial report, Aspinal of London experienced a decline in sales revenue of almost 4%, totaling £33.6 million. The gross margin percentage also saw a significant drop from 54.1% to 40.5%. As a result, the adjusted EBITDA showed a loss of £4.1 million, with a net loss of £12.5 million, which was considerably higher than the previous year’s loss of £5.9 million.
The decrease in sales can be attributed to the closure of unprofitable stores. However, the company’s online business, seen as the future direction of the brand, saw year-on-year growth. The substantial decrease in gross margin percentage was mainly due to stock write-offs and various other challenges. Additionally, the ongoing global pandemic had a negative impact on sales from February onwards, with many B2B orders and shipments being canceled or postponed. Despite these challenges, Aspinal of London’s e-commerce channel remained operational and performed strongly.
In response to the difficulties faced in the previous year, Aspinal of London took the opportunity to review its business model and refocus its UK operations on online and e-commerce activities. The company recognizes that the online channel offers higher margins, and by eliminating the overhead costs associated with operating physical stores nationwide, it believes it can improve its financial performance. This decision aligns with industry predictions that 25% of high-level fashion sales will be driven by e-commerce by 2025.
To implement these strategic changes, Aspinal of London underwent a Company Voluntary Arrangement (CVA) as the only viable option to exit unprofitable retail stores and leases. The CVA was successfully completed, resulting in the closure of all stores and concessions, except for a few key locations in London. The remaining flagship stores now operate on turnover rents.
In terms of its B2B channel, Aspinal of London now focuses on two franchise partners in China, one in the Middle East, and its “very profitable” corporate business. As a result, over 81% of the company’s business is conducted online.
The strategic shift towards online operations seems to be paying off, as Aspinal of London reported a 42% year-on-year increase in revenues for November and December 2020, despite the challenges posed by the pandemic. With over £8 million in cost-cutting measures implemented, the company is forecasting £3.5 million in EBITDA for the recently concluded financial year. This prediction is considered reliable as it is based on 11 months of actual trading and one month of forecasted performance.
Management believes that 2021 will be a pivotal year for Aspinal of London as it strives to become a profitable and cash-generative entity primarily operating as an online business.
Useful links:
1. Aspinal of London Official Website
2. Retail Gazette – Luxury Retail News
