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Missguided's 'transition' year sees losses, but it predicts profits ahead

today Dec 13, 2019
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Former high-flyer Missguided saw its sales falling by as much as £29m in the year to March 31, its latest set of accounts filed at Companies House showed on Friday. 

Missguided closed one store but is keeping Bluewater... for now - Image: Sandra Halliday

The retailer saw turnover dropping to £186.878m although its gross profit as a percentage of sales rose to 47.2%from 43.7%. That helped to push its EBITDA before exceptional items into a profit of £3.5m, an improvement on the £26.2m loss of the previous year. The pre-tax loss was just over £6m, down from almost £46m, while the after tax loss was £4.67m, having narrowed sharply from the £46.7m of the year before.

So, the figures don’t look great, but the company seemed happy. It said the year had been one of “transition” and that “good progress” was made with its turnaround. Management said it’s pleased with the controls developed around stock management and its cost efficiencies (which included reducing marketing spend), which boosted profitability.

It added that “significant groundwork has been laid, but there is still much to do on our journey back to growth”.

But while the return to underlying profitability was welcome, its core e-commerce revenues fell year-on-year, mainly in the UK, as those cutbacks in marketing investment led to reduced brand awareness.

Despite these challenges in its direct-to-consumer e-commerce channel, the brand continue to perform well in wholesale, however, with key accounts delivering like-for-like growth and helping to confirm the company’s view that it’s continuing to appeal to its target demographic.

As part of its efforts to rationalise its business, the company reversed its store opening strategy and shut its Westfield London site. It also negotiated an exit from its only other store (the large Bluewater location) back in March, but it has since taken on a short-term lease for it “on significantly improved terms”.

And it said that after the year ended, it has made further progress in its recovery with its current trading trajectory giving it confidence that it will “deliver a year of profitable growth in FY20”. That view is helped by the fact that its core e-tail channel is back into positive like-for-like sales growth while also delivering better margins; that wholesale in continuing to beat expectations; and that initial results from its new franchise channel “are encouraging”.

Analysts said that most of Missguided’s problems had been of its own making with GlobalData’s Sofie Willmott saying it “lost its way and let its more adaptable and hungry rivals swoop in and steal shoppers in the competitive, fast-moving online clothing market. Missguided was foolish to cut back on marketing spend and it will be difficult to win shoppers back following a quiet year. Although cutting costs has led to a much lower operating loss in FY2018/19 compared to the previous year, investment is required if Missguided is to achieve sales growth in FY2019/20”.

She’s also concerned that the mismanagement of inventory that left the company with excess aged stock is a further sign of it losing its way. And she highlighted how, five years ago, Missguided and Boohoo each had a 0.3% share of the UK womenswear market, but the one faltered while the other went from strength to strength.

However, she thinks that “despite missed opportunities and mistakes made in the past couple of years, including opening stores, there is still potential for Missguided to improve its performance. In a highly competitive market, the retailer must ensure its product range is right for its target customer and make its point of difference clear. Alongside this, Missguided is wise to pursue growth via new sales channels, namely wholesale, as well as opportunities abroad, with international markets now accounting for 43.7% of sales”.

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