Shares in out-of-fashion retailer Moss Bros (MOSB) were marked up 3.8% to 19.95p after the men’s tailoring specialist reported a return to like-for-like growth in its brick and mortar stores with healthy half year online sales as management’s turnaround initiatives bore early fruit.
Investors breathed a sigh of relief as London-headquartered Moss Bros flagged a positive reaction to new products and assured it was on track to meet full year forecasts, albeit estimates that have come down during a very tough period for the business.
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Against an ‘extremely challenging’ retail backdrop, results for the half year to 27 July revealed adjusted pre-tax profits of just above breakeven, down £200,000 year-on-year, as total sales ticked up a modest 1.4% to £65.4m.
STORES RETURN TO GROWTH
Encouragingly however, Moss Bros highlighted like-for-like retail sales up 2.9% with store like-for-like sales edging 0.6% higher. Growth in the core retail business was driven by investment in products, in acquiring new customers and in enlivening the in-store experience.
Moreover, Moss’ e-commerce channel also performed strongly, reflecting online sales growth through its own website and a successful launch in Next (NXT) Label.
Today, Moss Bros also announced the launch of the ‘Eco Suit’, with fabric made from up to 45 plastic bottles which would otherwise go to landfill, to help customers do their bit for the environment.
Disappointingly, like-for-like hire sales slumped 14.7%, although they only speak for 10.7% of total revenues. Within the hire business, lounge suiting for the first time proved to be the most challenged part of Moss Bros’ offer. Both morningwear, underpinned by a strong Ascot, and black tie product performed better than loungewear.
Reflecting on the first half showing, chief executive officer Brian Brick said ‘it feels that we are gaining traction in a number of areas. The return to growth of our stores is extremely important to us and we will continue to focus on maintaining this trend. The growth which we have seen in stores is set against a backdrop of lower footfall in our stores than last year in most locations in which we operate.’
Brick added that Tailor Me, Moss Bros’ custom made suiting proposition, ‘continues to go from strength to strength’.
Moss Bros closed the half with £18.2m cash in the coffers, enabling Brick to declare: ‘We remain EBITDA positive and debt free. The board’s decision not to recommend payment of an interim dividend has been made in order to continue to offer the business maximum flexibility for investment, whilst retaining a strong debt free balance sheet.’
WHAT THE ANALYSTS ARE SAYING
‘Management is on strong form, invigorated by a clear purpose, sharpened proposition and focus on the customer’, said Peel Hunt, pointing out ‘Moss is launching an Eco Suit (made from plastic bottles), a Ted Baker (TED) sustainable suit in November and a premium machine washable suit, amongst others. With customers wanting to dress more casual rather than dress down, such as wearing suits with T-shirts or gilets, the group’s accessories offer is changing to reflect this, with product extensions into gilets, knitwear and chinos.’
Cantor Fitzgerald Europe’s Mark Photiades commented: ‘Whilst we continue to believe that the business can restore profitability in the years ahead and growth prospects remain, we continue to take a cautious stance given the challenging underlying market conditions.’
Photiades said the risks to earnings include ‘the impact of rising clothing costs as a result of a weakening in sterling against the US dollar and increases in minimum wage rates.’
