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Moss Bros stock shortage leads to profit warning

Suits and hirewear retailer Moss Bros announced a profit warning and dividend cut today, saying that problems with stock availability will continue until spring.

The retailer, which said the issues affected stock in all channels, attributed the problems to the consolidation of the group's supplier base in response to sterling weakness.

Sales have also been slow, with the reduction in footfall experienced in December continuing into 2018. Moss Bros said that for the year ending 26 January 2019, the group will deliver profit “materially lower than expectations”, although there are no changes expected to the results for the 12 months to 27 January 2018, which will be announced next week.

The board is now recommending a final dividend of 1.97p, meaning a total final year dividend of 4p per share for FY17/18.

Brian Brick, Moss Bros CEO, said: "Although this has been a painful experience, I am confident that the availability issues are well on track to being resolved and the margin benefits from the consolidation will flow through.

“This stock shortage, has led to a disappointing start to the year and whilst we are still at a very early stage of our new financial year, the more cautious consumer environment and the effect of short term weather impacts, has led to a readjustment of our profit expectations, to protect the group's longer-term investments.”

He added: “In common with many UK retailers, the year ahead looks like being a very challenging one and we have taken action early to be sure we protect the underlying strength of the business.

“We do believe continued investment is essential to ensure we retain a sustainable point of differentiation and that we leverage our distinct position on the high street."

Over the last four years, Moss Bros has been undergoing a multichannel transformation, as – in the words of its CEO – it tries to catch up with other retailers in terms of its eCommerce operation. Sales growth had been encouraging in recent years, supported by new investments in customer relationship management and infrastructure.

As part of today’s profit warning, the business said it is important it continues to increase investment in key areas of future growth, “most notably our eCommerce business, our product development, the customer experience and our Tailor Me proposition”, which reportedly remain on plan.

Other UK high street businesses facing major challenges are baby and parent products retailer Mothercare and floorings retailer Carpetright, which today made announcements of their own.

Mothercare said discussions with its lenders on the terms of its existing financial facilities are progressing constructively as it looks for financial support. Carpetright, meanwhile, has agreed a loan of £12.5 million from shareholder Meditor European Master to assist with short-term working capital requirements.

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