Missguided sales rise pre-pandemic, lockdown sales climb

By

Sandra Halliday

Published
Jan 5, 2021

Missguided’s results for the year to March 29 2020 showed the online retailer enjoying “a year of stabilisation for the brand [with] good progress made for the second year in succession”. Although it continued to make net losses, it was profitable on an EBITDA basis, its turnover rose and it seemed to be doing well during the pandemic period.

The firm’s turnover returned to growth in the 12-month period (FY20), rising 8% to £201.9 million, after a year in which revenue had declined. Its EBITDA, at £2.118 million, “remained positive”, although it was still a drop from the £3.5 million it had reported in the previous financial year. But given that the prior year had included “£10.922 million of onerous lease and inventory impairment provision releases”, it was a good result. However, the operating loss widened to £5.1 million from £3.6 million and the net loss was £8.3 million, after a loss of £4.6 million a year earlier.

But on the sales front, it was largely good news for the firm in FY20. Its core e-commerce channel was boosted by increased marketing activity that helped its brand awareness and drove the revenue rise in both the UK and abroad. 

It also saw an improved gross margin (up to 48.4% from 47.2%) that reflected better inventory control with less need to resort to markdowns. 

As well as a better e-tail performance, the company said its strong revenue growth was repeated across its smaller wholesale and franchise channels, “giving the leadership team confidence that there is a demand for these channels and that they can deliver healthy revenue streams in the future”. 

But its physical retail channel saw falling revenue due to store closures in 2019. Its last remaining store (in the Bluewater mall in Kent) was closed for good last March, which was excellent timing given that the pandemic hit physical retail hard at the very same time.

STRONGER POSITION

Management said that the company is now on “a solid footing to increase investment and drive the brand forward” and having had an extra £19 million of shareholder funding pumped in during the year in question, it’s certainly in a better financial position.

But what about Covid-19? The financial year these accounts cover finished a week after the UK lockdown began. And while the firm was no longer operating physical stores at that point, it said it saw a “two-week-long demand shock” in the fortnight prior to the lockdown starting. That was because online sales “dropped significantly”.

But the drop was “almost entirely offset by a reduction in returns”. That happened as sales shifted to categories like loungewear that traditionally see lower returns, as well as early lockdown conditions making returns harder for consumers.

Its wholesale and franchise channels were also were also hurt by orders being put on hold. But demand quickly bounced back to normal levels and Missguided said it has “subsequently been on an upward trajectory”.

The company started the current financial year strongly and has been adding new customers, especially in international markets. It also said that it's continuing to see low returns rates (although these have shown signs of normalising when lockdowns ease). But the strength of its current performance gives management confidence that it can deliver another year or profitable growth in FY 21.