Profits warning at retailer
Moss Bros boss says stock delays ‘painful’
Unsuitable: the retailer says stock delays have been ‘painful’
Moss Bros, the suit hire company, became the latest high street retailer to report trading difficulties, issuing a profits warning and a cut to its dividend.
In an update this morning it said a shortfall of stock had been a “painful experience” and said profits next year will be at “a level materially lower than current market expectations.”
Hire sales “continue to be challenging” and the group has remained “prudent”. A reduction in store footfall, experienced towards the latter part of December, has continued, reflecting a “more cautious consumer environment”.
The group said it does not anticipate any change to the previously announced expectations for the results for the 52-week period ending 27 January 2018, which will be announced on 27 March as planned.
In a statement, the company said: “Whilst Moss Bros now anticipates lower full year sales as a result of the above issues, it is important that we continue to increase our investment in key areas of future growth, most notably our ecommerce business, our product development, the customer experience and our Tailor Me proposition, which remains on plan.
“Our offer is strong, we continue to achieve traction from our investments in the business and we are confident that the business will return to strong growth.
The board will be recommending a final dividend of 1.97p, meaning a total FY dividend of 4p per share for FY17/18 (5.89p FY16/17).
Commenting on the outlook, Brian Brick, chief executive, said: “The beginning of the year has been hampered by short term stock delivery issues caused by the consolidation of our supplier base.
“The resulting stock shortage has undoubtedly driven a significant shortfall in sales, which will continue until late Spring. Although this has been a painful experience, I am confident that the availability issues are well on track to being resolved and the margin benefits from the consolidation will flow through.
“This stock shortage, has led to a disappointing start to the year and whilst we are still at a very early stage of our new financial year, the more cautious consumer environment and the effect of short term weather impacts, has led to a readjustment of our profit expectations, to protect the Group’s longer term investments.
“In common with many UK retailers, the year ahead looks like being a very challenging one and we have taken action early to be sure we protect the underlying strength of the business.
“We do believe continued investment is essential to ensure we retain a sustainable point of differentiation and that we leverage our distinct position on the high street.”
Russ Mould, investment director at AJ Bell, said: “Moss Bros has followed a similar pattern to many other retail companies. First came the slowdown in sales growth, then came the profit warning; and now we’ve got the second profit warning and a dividend cut.
“The company says it is taking action early in order to protect the underlying strength of the business. However, tradition suggests companies in Moss Bros’ situation normally have one more profit warning upon which the management start to take more drastic action.
“A lack of stock is one of the worst things to happen to a retailer as the few customers who are walking into its shops may leave disappointed if they can’t get what they want.
“Moss Bros says its stock shortage will last until late spring, so clearly there are elevated risks over near-term earnings.”