Fragrance Direct predicts return to growth after ‘challenging year’
Fragrance Direct has said it expects its performance to improve over the coming months after blaming its fall in sales on a number of factors including the cost-of-living crisis.
The Southampton-headquartered online retailer added that its turnover was also slashed by over £20m because of the partial revival of the UK high street following the Covid-19 pandemic, increased online competition, Royal Mail strikes and supply chain issues.
The business also cited a rise in marketing costs after the roll-out of a new website significantly hit its SEO performance.
In accounts just published for its 2022 financial year, Fragrance Direct posted a turnover of £28.8m, down from £49.8m, while its pre-tax losses went from £3.9m to £3.3m.
During the financial year, the average number of people employed by Fragrance Direct fell from 98 to 41.
Fragrance Direct was established in 1993 and specialises in selling branded beauty products, including fragrances, makeup, skincare and haircare essentials along with gift sets.
The company acquired by a joint venture between the owners of counterpart Allbeauty, private investors and an investment fund in March 2021.
‘Drastic downturn’
A statement signed off by the board said: “The company had a challenging year, with turnover… being significantly lower than the prior period.
“Gross profit margins remained broadly consistent with prior periods, but direct costs and administrative expenses did not fall with the drop in turnover and so an operating loss of £3.3m is reported for the year.
“This included several items of exceptional expenses related to the company’s integration into the Maximo Group following its change of control in 2021, and also costs relating to the closure of its existing warehouse and a move to new group premises.
“The reduction in performance in 2022 was driven by a combination of external factors along with company specific changes.
“The shift to online shopping seen with the onset of the Covid-19 pandemic benefitted the company greatly in 2020, and to a large extent in 2021.
“2022, however, saw many consumers make a partial return to the high street as well as the larger bricks and mortar retailers entering the online retail space much more aggressively than in pre-pandemic times.
“The cost-of-living crisis, supply chain issues and Royal Mail strikes have also been well-documented and impacted the company’s sales significantly over the course of the year.
“Internally, the launch of a new website in April 2022 saw a drastic downturn in the company’s SEO performance, leading to the business to incur vastly increased marketing costs in order to bolster sales, while running costs of the new warehouse hit the bottom line through a marked rise in fixed costs.”
‘Performance is expected to improve’
The company’s most recent set of accounts have just been published on Companies House and were signed off by the board in October 2023.
On its performance during 2023, the firm added: ” A new management team has been in place since early 2023 as part of an overhaul of the whole Maximo Group.
“The group undertook a significant equity fundraise in May 2023 to enable the company and its sister businesses to drive growth and profitability, and performance is expected to improve in the second half of 2023 and into 2024.
“The group’s cost base has been reduced dramatically, and the new management team has successfully assigned the costly warehouse lease in favour of a third part fulfilment and website hosting arrangement.”