M&Co reports first loss but plans overseas expansion

SCOTTISH retailer M&Co has unveiled its first loss in 50 years alongside ambitious plans to expand in the Middle East and Russia.

The company, one of Britain’s biggest privately-owned fashion chains with almost 300 stores, suffered from the downturn and unseasonal weather but also admitted to getting its stock selection wrong.

However, the firm intends to open 30 outlets in the Gulf region in conjunction with Middle East partner LIWA after opening three in the United Arab Emirates in the past year.

It also has a team in Russia from where it already derives 9 per cent of its online sales. The company is looking to open retail outlets in the country.

The expansion plans come at a time when the firm is facing what chairman Ian McGeoch described as “some of the most challenging trading conditions we have ever experienced”.

He said uncertainty in the economy and unseasonable summer weather had contributed to the weak trading performance along with price rises, higher VAT and “some internal errors in product selection” which forced the company to discount heavily to clear stock.

Mackays Stores Group, trading as M&Co, reported an £8.6 million pre-tax loss in the year to 24 February compared to an £11.5m profit last time. The operating loss was £5m against a £14.7m profit last time. Turnover fell 7 per cent from £187m to £173.3m. Twelve unprofitable stores were closed.

“Our 2011-12 results were very disappointing,” said McGeoch. “In our 50 year trading history we have never before made an operating loss, although earnings before interest, tax, depreciation and amortisation [EBITDA] were positive at £4.6m.”

He said there had been favourable customer reaction to the new autumn winter 2012 (AW12) collection which has seen a lift in like-for-like sales.

“We remain excited by our new developing international business, having opened three new franchise stores in the UAE, with further stores to open in 2013,” he said.

“MandCo.com continues to grow in the UK and internationally and multi-channel trading remains an integral part of our business strategy.

“Current trading has been challenging but much better in the autumn winter season, and we expect to see a return to profit despite the incredibly poor summer weather, which had a significant effect on sales.

“The new AW12 collection has had a good reaction and has seen improved rates of sale and consistent like for like gains against last year. We remain positive for a much better overall result which we credit to the much improved product range as a result of a buying restructure.”

During the year the group, which has a global workforce of 3,500, secured its borrowing facilities for a further five years with its existing banks, Clydesdale and HSBC.

The highest paid director, believed to be McGeoch, saw his pay package, including benefits, cut from £500,620 to £309,219.

An allocation of shares was paid to 1,900 qualifying staff under the group’s share incentive plan. The company, based at the Inchinnan Business Park adjacent to Glasgow airport, paid a dividend of £1.97m.