Reporting an almost imperceptible sales increase and just about positive results before tax and exceptional items for the financial year ended on March 3, 2007, the British outdoor and action sports retailer indicates that it remains considerably under market pressure.
In line with the warning it issued in January, Blacks Leisure Group reported sales of £298.3 million (€439.3m-$593.1m), up by just 0.4 percent compared with the previous year and down by 2.7 percent on a comparable basis. The slight increase was generated entirely by its outdoor and action sports retail outlets, which saw their sales crawl up by 0.7 percent to £269.4 million (€396.7m-$535.6m), while Blacks’ distribution of O’Neill products through its stores and to third parties decreased by 3 percent to £28.9 million (€42.6m-$57.5m) for the year.
The gross margin diminished by 1.3 percentage points to 55.6 percent, bringing Blacks’ operating profit before exceptional items down to £1.6 million (€2.4m-$3.2m), compared with £22.4 million in the previous year. Adding financial costs and exceptional items of £13.9 million (€20.5m-$27.6m), chiefly relating to the closure of 45 loss-making stores announced earlier this year, Blacks ended the year with a net loss of £12.6 million (€18.6m-$25.1m).
The company saw some improvement in sales for the 8 weeks until April 28, which were up by 2.7 percent in absolute terms and by 0.8 percent on a same-store basis. For the coming weeks, Blacks is most upbeat about its camping products. On the other hand it warns that the start of the current year has again been affected by warm weather, which reduced sales of high-margin waterproof clothing. Furthermore, clearances of winter stocks in March reduced margins for the month, although they have picked up thereafter and edged closer to last year’s level for the period.
Along with the store closures, which predominantly affected Millets stores, Blacks has been taking many other measures to deal with its declining results. The extensive review launched earlier this year is meant to adjust Blacks’ product offering to shifting weather conditions, to improve its price positioning in the face of tough competition, and to more tightly control costs and working capital. Only two more Blacks out of town stores will be opened during the rest of the financial year.
As reported last month, the retailer’s initiatives have annoyed some suppliers who refused to go along with tightened trading conditions. However, Blacks indicated that the damage had been limited to three suppliers, and it thanked the others for their support of the restructuring measures, which are expected to lead to “materially improved” performance for the current year.
Blacks launched last year Technicals, Freespirit and Rare Species, three private labels which made up 6.4 percent of sales. The relaunch of the Blacks and Millets websites in May last year led to a rise of almost 70 percent in their sales compared with the previous year, with on-line sales now making up 1.2 percent of the retailer’s turnover.
At the same time, Blacks has been rethinking its offering to come up with ranges that include garments for all weather conditions. For the summer this means an earlier and wider assortment of products like shorts and sunglasses. Furthermore the retailer has developed parallel ranges for beach, garden and festival activities. For the winter, the changes will lead to the introduction of lighter fabrics. Still, the company says the ranges should not be fully “weather-proof” until next year.
Blacks Leisure’s new distribution center was completed in June, grouping four warehouses. Although the transition caused some dual costs for the year, the benefits will become apparent in the present year.