Red no longer the new black at Moss Bros

published 29 March 2012

Moss Bros, the go-to store for top hat and tails hire, returned to the black last year, ahead of management's expectations.

Profit before tax from continuing operations in the 52 weeks to January 28th, 2012 was £0.9m, ahead of market expectations of a profit of £0.5m, and a turnaround from the underlying loss of £8.9m the year before.

As well as surprising with the size of its profit, Moss Bros also caught the market out by announcing its first dividend since 2007, with a proposal to pay 0.4p per share.

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Sales from continuing operations advanced to £101.1m, in line with expectations, from £87.8m the year before.

Group sales, including value added tax (VAT) were up 12.5% year-on-year on a like-for-like (LFL) basis, which bettered the year before's growth rate of 10.7%.

On the hire side of the business, LFL revenues were up 10.1%, while the group's clothes selling business saw LFL sales rise 13.1%.

After the sale of 15 Hugo Boss franchised stores and eight Cecil Gee stores, the group is sitting on a pile of cash. The cash balance at the end of January stood at £23.3m, up from £6.9m a year earlier.

The group's renaissance has continued since the financial year end, with LFL sales in the eight weeks to March 25th continuing to improve, though the group has seen gross margins come under pressure as a result of rising raw material profits.

LFL cash gross profit in the eight-week period was 3.65 ahead of last year.

"In spite of tough trading conditions, we continue to make great progress in turning the business around. We have continued with our work on the new store fits, to improve the customer perception of the brand and to improve financial returns. During 2012/13 we will continue to carry out test refits on selected stores, to assess the impact on sales," revealed Chief Executive Officer Brian Brick.

Broker WH Ireland said: "These results again demonstrate excellent progress against the turnaround strategy. Following the results, we leave our forecasts unchanged but raise our share price target to 58p (50p)."

Meanwhile, Peel Hunt noted that "online sales increased by 105% over 2012FY [financial year], but represent just 1.5% of sales.

"While Moss is about to launch click & collect for Retail, the real upside will come from the new web platform and single stock file, which will be completed in the next year. The initial target is to raise online penetration to 10% of sales. The combination of Hire and Bespoke provides a significant level of customer data on which to leverage multi-channel CRM [customer relationship management]," Peel Hunt analyst John Stevenson said.