It may be loss-making but Paul Smith hails “strong recovery” last year

It may be loss-making but Paul Smith hails “strong recovery” last year

Paul Smith‘s newly filed results for the year to the end of June show the company continuing to “recover strongly” as it had in its previous finical year. However, it remained loss-making and admitted it faced challenges in the 12-month period, along with the rest of the industry.

Paul Smith’s AW23 campaign starred actor Matt Smith – Paul Smith

Paul Smith Group Holdings Limited — the ultimate holding company for all of the activities under the Paul Smith name — said that turnover has increased to pre-pandemic levels, but the cost of doing business has risen as well as it continues to invest in growth through increased promotional activities.

Its group turnover rose 7.7% in the 12 months to June 2023, hitting £212.5 million with an increase across all of its major channels. The gross margin improved as a result of higher volumes, stock efficiencies and a move back to its more traditional mix of product sales reflecting a return to tailoring.

Gross profit was £112.5 million, up from £99.2 million, and operating profit edged up to £4.1 million from £4 million. But the pre-tax loss was £2.3 million, although this narrowed from £3.1 million the year before. The net loss for the financial year widened however, reaching £4.1 million from £3.6 million in the prior 12 months.

It ended the year with a strong cash position despite the loss, and net assets were £74.1 million, up from £68.8 million a year earlier after a share issue during the period of £10 million.

The company said the result for the year was “satisfactory”. Retail sales for the period increased 12.8% overall and 12.5% on a like for like basis, boosted by a gradual increase in footfall, travel and commuting. Retail sales for the AW22 season were up 8.2% overall year on year and 7.3% like for like. They were also up 6.3% like for like compared to the pre-pandemic autumn season. Meanwhile, retail sales for SS23 rose 8.9% and a healthy 11.6% like for like, while they too increased compared to the pre-pandemic season with a 16.6% rise.

The company said it’s been seeing “pleasing” more recent improvements in footfall and traffic too with overall retail like for like sales for AW23 so far up 11.6% on the year and up 16.6% versus the same season in 2019. Within this e-commerce sales are up 16.8% year on year.

With all of its physical shops now open, direct e-tail sales accounted for 31% of its retail sales total compared to 34% in the previous year. However, it’s been pleased with its e-commerce performance, especially compared to its competitors, and will continue to invest in its digital capability and digital marketing activity.

The business also highlighted some “very encouraging signs of growth”, particularly in its tailoring categories, as well as increasing footfall in some of its largest stores as customers return to city centres and airport shops.

Paul Smith – Spring-Summer2023 – Menswear – Paris – © ImaxTree

But despite the more buoyant activity in physical shops, it has continued to review and refine its portfolio of physical spaces and closed shops in Melbourne and Sydney last March. It also relocated its Amsterdam store, and its Heathrow Terminal 2 store was closed for a while during the year for a revamp.

Wholesale improved as well in the period with such sales to franchise partners, department stores and multibrand shops/online retailers globally up 4.2% at £86.1 million. The company said it continue to perform well in terms of deliveries and sell-through, and its wholesale business remained “resilient despite multiple challenges”, particularly in its largest market, the UK. It’s staying cautious for the coming year though as its “wholesale partners are managing their stock levels and liquidity having found recovery slower than hoped”.

Licensing income for the business increased by a narrow 0.9% during the year to £15.8 million, mainly as a result of a successful launch with its new eyewear partner. The company operates both territorial and product licenses. The territorial licenses mainly cover Japan and its product licenses cover the aforementioned eyewear as well as fragrance, rugs and other homewares, plus kidswear.

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