LONDON (Alliance News) - Moss Bros Group PLC shares were on the sale rack Friday after the company warned that its annual operating profit will be "materially lower than current market expectations" after swinging to a loss in the first half of the year.
Shares in the men's formal wear retailer were trading down 16% at 39.11 pence each following the news.
For the six months to July 26, Moss Bros, which also rents suits, posted a pretax loss of GBP1.7 million compared to a GBP3.9 million profit in the comparative period a year ago. This was on the back of lower sales for the period, GBP1.2 million in store impairments, and GBP800,000 in reorganisation and employee-related costs.
Total revenue for the six months dipped 3.3% to GBP64.5 million from GBP66.6 million in the prior year, while cost of sales increased slightly to GBP26.8 million from GBP26.1 million.
Administrative expenses and shop costs also increased, by 17% and 7% to GBP3.4 million and GBP36.2 million, respectively.
Like-for-like Retail sales including online decreased by 6.9% to GBP56.5 million but online only sales were up 9.5% year-on-year. Hire sales were down 7.8% on last year at GBP7.9 million.
The fashion retailer blamed "the extended period of hot weather" and the "distraction of England's success at the World Cup" for the results as they reduced customer footfall reduced in the second quarter by an average 7%. In the worst affected stores, footfall was down 14%.
Despite the disappointing results, Moss Bros proposed an interim dividend of 1.50 pence, lowered from last year's 2.03p.
looking ahead, Moss Bros said the first seven weeks of its second half showed improvement on the first half, with Retail sales down 3.7% year-on-year and Hire sales down 13%. E-Commerce sales however, increased by 23%.
The company said it decided to "continue to invest" rather than cut costs. This choice however will result in an annual operating profit "materially lower than current market expectation of GBP2.3 million", it warned.
Chief Executive Officer Brian Brick said: "We have reviewed our expectations for the second half of the year despite having a number of key trading weeks still ahead of us and whilst short-term cost cutting would make us more certain of mitigating the footfall related gross profit shortfall and therefore hitting the market's expectations, we feel it would be detrimental to the long-term health of the business.
"As such, we have taken the decision to continue to invest and to deliver profit lower than expectations."