Men's tailoring specialist Moss Bros (MOSB) is under the cosh this morning after warning on profits and cutting its dividend. This blow comes alongside first half results showing a painful swing into the red.
The key details from the figures are that the company has swung from a pre-tax profit of £3.9m to a half year pre-tax loss of £1.7m, partly accounted for by £1.2m in impairments on underperforming stores and a £0.8m hit for 'reorganisation and employee-related costs.'
Revenue is down 3.3% in the period with like-for-like sales down 6.9% and customer footfall down by an average of 7% year-on-year.
Declaring a half year dividend of 1.5p per share, versus 2.03p this time last year, puts massive pressure on full year payout expectations of 4.06p, according to consensus forecasts.
Despite flagging a recent improvement in trading the company does not expect to make up any shortfall in the second half, particularly as it has resisted the temptation to slash prices to get customers back in its stores, arguably a sound long-term strategy.
WEAK EXCUSES
However, the reasons given for the recent pressure on sales, the World Cup and summer heatwave, look much less sound to us.
As AJ Bell investment director Russ Mould observes: 'It feels like the excuse for weak trading from suit seller Moss Bros today falls into the 'dog ate my homework' category.
'Perhaps the company could be forgiven for blaming the hot weather - shopping for a heavy suit might not appeal when the sun is blazing. However, attributing its problems to the 'distraction' posed by England's success at the World Cup feels pretty tenuous.
'As a reminder, England played seven games at the tournament and of those, just three, including a pretty meaningless third place play off, were played at times when most Moss Bros stores would even have been open.
'Plus, manager Gareth Southgate's habit of wearing a waistcoat on the touchline saw sales of M&S waistcoats soar and could arguably have given a boost to the idea of wearing formalwear in general. After all, Moss Bros also sells waistcoats and should have been a beneficiary of the Southgate trend too.'
Mould points out that investors will expect a 'distinct improvement' in trading when the company next updates the market if the weather and World Cup were truly to blame for this rough patch.
