Adena Brands, the owner of Monsoon and Accessorize, has filed its accounts for the year to the end of August and revealed a loss for the period as consumer demand weakened and it faced major wage inflation.
The company said that sales fell 11% and it made a pre-exceptional EBITDA loss of £2.4 million against the backdrop of a challenging environment. But it didn’t only blame external circumstances. It said it saw “underperformance in several areas, and the results reflect both that underperformance and the investments made to turn the performance around”.
So before we get into the details of the performance and its investment, let’s look at more of the figures. Total turnover dropped from £231 million to £204.6 million and gross profit fell to £128.3 million from £143.7 million. The pre-tax loss was £7.53 million, down from a £14 million profit a year earlier and the net loss was £6.25 million after an £11.67 million net profit in the previous year.
The company said that during the period, as part of its ongoing turnaround efforts, it focused on 3 underperforming areas. These were its Monsoon retail portfolio, it’s Monsoon childrenswear business and several key international markets (Saudi Arabia, Italy and Germany).
And it added that “the actions we took have addressed the under performance, but they required investment and evolved transitions that led to lower sales, significantly impacting our results for the period. These realignments are largely complete as we trade through our current fiscal year and we are seeing the benefits”.
Good news came from the fact that despite the challenges, the company said its core UK Accessorize business and Monsoon women’s business (that combined account for around 70% of its sales) “continue to perform well in a difficult retail environment”. The strength of those businesses meant it was able to absorb the cost of the aforementioned realignments, as well as continuing to invest in its brands and its ongoing multi-year programme of tech systems upgrades.
And in the current financial year that began last September, despite continued weak consumer spending and a new round of wage cost increases, the group is seeing positive results from its investments and the continued strong performance of its core divisions.
Its current financial year is two-thirds complete and the company has seen a return to sales growth so far, as well as a return to profitability and “much better performance in the areas that caused such concern last year”.
Looking more closely at the actions it took to improve its performance, the company said that within its Monsoon retail portfolio it continued to close legacy dual-format stores (those older stores that combined both Monsoon and Accessorize in a single space) as their leases expired. It also paused its rollout of Monsoon boutique stores “to give time to create a supporting outlet business and to test revised shopping centre format and station and airport travel locations”. This meant its Monsoon retail sales were lower than it originally planned as reduced sales from closures outweighed new sales from openings.
It also “realigned” its Monsoon kidswear business, rebuilding the leadership team and completely redesigning its collections. Given the time required to design new collections and sell-through existing stock, it absorbed the impact of lower sales and markdown costs.
As for the international business, it transitioned its two largest international operations during the period moving to a new franchise partner in Saudi Arabia and transitioning away from a franchise partner to an owned subsidiary in Italy. That meant sales were impacted in these markets and those now-complete transitions also saw “significant” costs. The company also closed a small trial of five Accessorize airport stores in Germany. It said it was a hard decision but relatively weak German airport recovery post-Covid and wider economic headwinds damaged the profitability of the stores.
As well as closures though, it also saw openings with the last year seeing it opening 13 new Accessorize stores and re-fitting another four. That means the majority of that brand’s retail portfolio is now in its latest design and its new stores have performed well. And a smaller, jewellery-focused store in London is providing a template for smaller, higher-margin stores. It also opened a larger-format location in Harrogate with a full range of product, including clothing and gifting, providing another template.
It opened several new Monsoon stores during the year too and its travel-focused format in Waterloo is providing it with a template for a higher-density store type within shopping centres and other travel locations (including two locations at Gatwick that it opened early this year).
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