Bonmarché in profit warning as Brexit uncertainty dents consumer confidence

By

Sandra Halliday

Published
Dec 13, 2018

Another day, another profit warning. This time it was budget fashion retailer Bonmarché Holdings serving up bad news with the firm saying its Black Friday week trading figures were “extremely poor, particularly in the retail stores”.

This means that it now estimates underlying pre-tax profit to be in a pretty wide range of “breakeven to a loss of £4m for the current financial year.” The lack of a very specific figure highlights the huge uncertainty in the market.

The company said that the mid-point of this range corresponds to a store like-for-like sales assumption for Q3 of roughly -12%, and around -1% for Q4, against a particularly weak comparative last year of -11%.

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So what’s going wrong, as if we didn’t know? Brexit, which is impacting consumer willingness to spend. On Thursday, the company said that in its interim results announcement it noted that, despite strong year-on-year growth in online sales, store comp sales had remained weak, and the start to the autumn/winter season had been slow. For the group to be confident of achieving the £5.5m underlying pre-tax profit forecast for FY19, sales needed to meet expectations during the key trading period from Black Friday through to Christmas.

It had expected this to happen, especially as the pattern of customers delaying purchases in anticipation of being able to take advantage of Black Friday discounts, looked to be repeated last month. 

But Black Friday week seems to have delivered something of a shock, as mentioned, and “sales have not recovered since Black Friday, despite the application of extensive discounts.”

“We believe that uncertainty surrounding Brexit is a significant factor affecting demand and, therefore, that it may not strengthen until the current period of heightened uncertainty ends,” it said. “As we have no visibility of when matters will be resolved, we have taken what we believe to be a cautious approach to our forecast and assumed that sales will not show any significant improvement before the end of March 2019.”

But at least the group’s “cash reserves are expected to be adequate to meet its liquidity requirements.”

CEO Helen Connolly said the current trading conditions are “unprecedented in our experience and are significantly worse even than during the recession of 2008/9. I hope that in the fullness of time, our cut to the forecast may prove to have been overdone, but in the current market, this seems the appropriate stance to adopt. I believe that Bonmarché is well prepared to weather the storm, and that we can look forward to some recovery in FY20. Accordingly, the board remains confident in the strategy, and in the company's long-term prospects.”