Paul Smith Group Holdings, the parent company of the Paul Smith brand, has announced a loss for the fiscal year ending June 30, 2020, as the Covid-19 pandemic severely impacted sales. The final quarter of the year was particularly difficult, as the initial wave of the virus and subsequent lockdowns led to a significant decline in sales. As a result, the group’s turnover dropped by 18% to £177 million for the year. The company also experienced a decrease in gross margin, resulting in an operating loss of £21 million. This is in stark contrast to the previous year, where the company achieved an operating profit of £5.7 million. The loss includes exceptional costs, such as a decrease in investment property values, but was partially offset by government job support assistance totaling over £4 million. The net loss for the year amounted to £21.6 million, compared to a profit of £3.6 million in 2019.
The challenges brought forth by the pandemic had a widespread impact on all aspects of Paul Smith’s trading markets, affecting customers, partners, suppliers, and employees. However, the company managed to effectively protect its teams and cash flow. In terms of sales, retail sales experienced a 23% overall decrease for the year, and a 24% decline on a like-for-like basis. Prior to the pandemic, retail sales had maintained relative stability on a like-for-like basis, except for weak sales in Hong Kong due to pro-democracy protests. Sales for the Autumn/Winter 2019 collection increased by 1% overall, but declined by 1% on a like-for-like basis. The Spring/Summer 2020 collection showcased the true impact of the pandemic, with a 51% decline in like-for-like retail sales. The Autumn/Winter 2020 collection saw a lesser decline of 34%, while e-commerce sales increased by 49%. E-commerce sales accounted for 27% of the company’s total retail sales, up from 24% the previous year. Paul Smith anticipates this percentage to continue growing due to current market trends and ongoing investment in digital capabilities.
While e-commerce has gained increasing importance, physical retail remains a significant focus for the company. Most of its stores have reopened, though lease expirations resulted in the closure of some locations, including one in London, one in Paris, its Las Vegas store, and three in New York. However, Paul Smith has recently opened a new store in Los Angeles. On the wholesale front, sales to department stores, multi-brand shops, and online retailers globally decreased by 10% to £71.7 million. Wholesale had been performing well before the pandemic, with forward orders continuing to grow. However, the cancellation of the regular Paris show for the Spring/Summer 2021 collection, along with travel restrictions for wholesale customers, led to a 35% year-on-year decline in forward orders for the collection. The company anticipates a challenging business environment due to low retail footfall, excess stock in the market, and ongoing uncertainty about the future.
Despite the obstacles faced, Paul Smith has secured additional funding of £44 million from its shareholders and is actively working towards returning to the positive growth trajectory it experienced prior to the pandemic.
Useful links:
– Paul Smith Official Website
– Paul Smith Group Holdings on Reuters
