Luxury leather goods and stationery retailer Smythson has reported an increase in sales but also a return to losses in its latest financial report. The company’s turnover rose from £16.9 million to £20.6 million, showing a positive trend. However, the gross profit as a percentage decreased slightly from 59.9% to 59.5%. In terms of EBITDA, Smythson experienced a loss of £7.3 million, compared to a profit of £3.1 million in the previous year. This follows a loss of £5.2 million the year before. The company also saw a pre-tax and post-tax loss of £8.5 million, contrasting with a profit of £1.9 million in the previous 12-month period. Two years ago, it recorded a net loss of £6.4 million.
The ongoing challenges posed by the Covid-19 pandemic contributed to these recent losses. With the company’s stores in the UK remaining closed for a significant portion of the year, Smythson faced considerable difficulties. However, as life gradually returned to normal and consumer confidence grew, there was a strong rebound in retail performance towards the end of the financial year. Customers were eager to return to physical shopping, exceeding expectations and positively impacting sales.
In response to the changing landscape, Smythson is adopting a strategy that focuses on refining its retail network. This includes closing unprofitable stores, with the aim of creating a more stable base of overheads. This reallocation of resources and investment will enable the company to concentrate on enhancing brand visibility, expanding its digital channel, increasing its presence in key markets, and investing in product development and marketing. As part of this strategy, Smythson has already closed its stores at Royal Exchange and Bicester in 2022.
Although the extraordinary growth witnessed in e-commerce in the previous financial year slowed down as customers returned to in-store shopping, Smythson’s digital growth remains promising. It experienced over 30% growth, equivalent to more than £3 million, compared to the pre-pandemic year. Furthermore, its digital growth in the strategically important US market remained consistent year on year, driven by a 26% increase in conversion.
Smythson has also made recent changes to its agency partnerships, bringing on board a new creative agency and a new media buying agency since April 2022. These partnerships have already yielded positive results, particularly in the expansion territory of the US, where the company has seen year-to-date growth of over 12%.
While Smythson has not provided a specific timeline for returning to profitability, the directors express confidence in the company’s long-term ability to achieve sustainable sales growth. Additionally, the ultimate parent company has affirmed its commitment to providing financial support.
Overall, Smythson’s latest financial report reflects the significant impact of the pandemic on its operations, but also highlights signs of recovery as consumer behavior normalizes. The company’s strategic efforts, including the refinement of its retail network and focus on digital expansion, position it well for future growth and success in the luxury goods and stationery market.
Useful links:
1. Smythson Official Website
2. Fashion Industry Statistics
