Gymshark profits fall despite higher sales as markdowns dent margins
Gymshark Group has filed its accounts for the year to July 2022 and reported falling profit for the first time due to margins being eroded by the need to cut prices and other exceptional costs.
The profit figure was also affected by investment in setting up US distribution centres, as well as restructuring costs, its flagship store’s pre-opening expenses, and continued investment in people and technology.
Pre-tax profits fell 39% to £27.8 million, although revenues rose a hefty 21% to £484 million. Gross profit increased to £315.1 million from £282.8 million, and distribution and administrative costs ballooned. Operating profit was down to £29.5 million from £46.5 million and net profit for the financial year was £22.5 million, a drop from £36.4 million a year earlier.
Gymshark added that orders increased by 13.9% during the year – not as big as the 53% rise of the previous 12 month-period, but still impressive – and units sold increased by 27.5%. Conversion was also up by 10bps and international sales increased by 16.7%.
The company, which is the parent of Gymshark Ltd and Gymshark USA, said that during the period covered (which began in summer 2021) all countries where it trades were affected both by the pandemic and the post-pandemic relaxation of restrictions.
It was affected by rising input costs in its supply chain, including higher, raw materials, fuel and labour costs, and the impact of increased freight and logistics costs. It also said that the consumer had more opportunities to use their discretionary spend on things other than fitness clothing such as entertainment and travel. But despite all of these headwinds, it still managed to grow its sales both in its international unit and the US.
It took some big steps during the year, signing a lease for a flagship store on London’s Regent Street (which has been open since last October) and is using the space to “bring the brand to a wider audience in real life, with a mixture of in-store experiences, personalised products, and community-based events”.
The year in question also saw it making further investment in its US team and founder and majority, shareholder Ben Francis becoming CEO at the start of the financial year.
Citing the many challenges presented by the macroeconomic environment in the period, a company spokesperson told Fashionnetwork.com: “Yes, there have been challenges, and it would have been tempting to hold on to the money in the bank.
“However, unlike so many, we refused to be swayed by macro-economic conditions and so doubled down on investment, whether in the international markets or in opening our first-ever permanent flagship store on Regent Street, which is now outperforming our forecasts and setting us up for further growth in the UK. Our decision to invest when we did is now paying off globally, as we are seeing double-digit growth in our revenue and trading in line with our group forecast.”
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