Smythson swings to profit despite lower sales
Frank Smythson has filed its results for the year ended March 2021 with the luxury leather goods and stationery retailer saying that turnover fell to £16.9 million from £27.6 million, with gross profit as a percentage down to 59.9% from 64.7%.
But profit on an EBITDA basis was £3.1 million, which easily beat the £5.2 million loss of the year before.
It also said that pre-tax profit and net profit both came in at £1.9 million compared to a loss of £6.4 million in the previous period.
This set of results takes in almost the whole of UK lockdown number one, plus further lockdowns later in the year. And it’s clear that the company struggled during the early months of the pandemic, as well as facing general consumer caution about shopping in physical spaces even when stores were open.
The company — whose products are made in the UK and via a group-owned company in Italy — operated from 12 monobrand locations as of March 2021, as well as online.
Those stores were shut for long periods during the financial year in question. But it said that consumer confidence and a desire to return to physical shopping after such a long period of having to shop solely online “has surpassed our expectations and resulted in a strong retail performance in the second part of the financial year.”
The company is continuing to refine its retail network and is exiting unprofitable stores. It said this would create a more stable base of overheads and enable effort and investment to be concentrated on growing brand visibility, boosting its digital channels, expanding its presence in key markets and investing in product development and marketing.
And its digital investment will be key. Its e-commerce channel benefited enormously as shoppers switched their activity online during lockdowns and while the reopening of stores has crimped online growth across the market since then, the company said that its own online growth has been impressive.
It's digital sales versus the pre-pandemic period were up more than 30% – or £3 million – in the year in question. It was also level on the year in its strategically key US territory, driven by a 25% increase in conversion.
And it added that the directors are confident that in the longer term, the business can deliver sustainable sales growth.
Of course, challenges remain and since the year ended, it has been in ongoing negotiations with its landlords and has managed to secure rent concessions.
It also said demand in the luxury retail sector remains uncertain due to global and local economic conditions resulting from the aftermath of the pandemic and the recent conflict in Ukraine. Plus it's had to face cost increases within its supply chain.
However, on the plus side, it has managed to navigate the Brexit situation fairly smoothly and its Italian operation (where its leather goods are produced) is handling wholesale orders outside of the UK.
Work is also under way to further improve the situation with the development of a second hub in Italy from which it will dispatch both EU and rest-of-world orders.
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