Luxury leather goods and stationery retailer Smythson has managed to achieve profitability despite a drop in sales. The company’s turnover fell from £27.6 million to £16.9 million, with gross profit as a percentage decreasing from 64.7% to 59.9%. However, Smythson was able to generate a profit of £3.1 million on an EBITDA basis, surpassing the previous year’s loss of £5.2 million. Pre-tax profit and net profit both reached £1.9 million, showing a significant improvement from the £6.4 million loss in the previous period.
These financial results cover a period when Smythson faced various challenges due to the first UK lockdown and subsequent lockdowns throughout the year. The company had to deal with consumer caution towards physical shopping, even when stores were open. Despite these obstacles, Smythson maintained a strong online presence and operated from 12 monobrand locations. Although the stores faced prolonged closures, there was a surge in the desire for physical shopping after months of exclusively online shopping. This contributed to a robust retail performance during the latter part of the financial year.
As part of its strategy for future growth, Smythson is actively refining its retail network and closing unprofitable stores. This allows the company to focus its efforts and investments on enhancing brand visibility, expanding its digital channels, entering key markets, and investing in product development and marketing. Digital sales played a crucial role in Smythson’s success, with its e-commerce channel experiencing significant growth during the lockdowns. Despite the reopening of physical stores impacting overall online growth in the market, Smythson’s digital sales increased by over 30% to an impressive £3 million. The company also achieved stable performance in its strategically important US market, with a 25% increase in conversion.
The directors of Smythson are confident in the company’s ability to achieve sustainable sales growth in the long term. However, challenges persist, including uncertain demand in the luxury retail sector due to global economic conditions and geopolitical conflicts. Smythson has also faced cost fluctuations within its supply chain. Nevertheless, the company successfully navigated the Brexit situation and continues to fulfill wholesale orders outside of the UK through its Italian operation.
To address the current situation, Smythson is actively negotiating with landlords and has secured rent concessions. Additionally, the company is developing a second hub in Italy to improve dispatch efficiency for EU and global orders. Despite uncertainties, Smythson remains optimistic about its prospects and is dedicated to delivering growth through its refined retail network, digital investments, and continuous brand development.
Useful links:
1. Smythson Official Website
2. Financial Times (for general financial news)
