John Smedley Blames Inflation and Yen Woes for Steep Losses

Luxury knitwear brand John Smedley has navigated a "particularly difficult year," as revealed by its newly filed results for the 12 months ending March. The period saw a notable decline in key financial metrics, reflecting a challenging economic landscape.

Quantifying the impact, sales in the 2024/25 fiscal year experienced a 5.23% decrease, following a modest 0.52% dip in the preceding 2023/24 year. Gross profit also saw a significant reduction of 7%, compounding a 9.7% fall in the prior year. Turnover dropped from £17.7 million to £16.8 million, while gross profit fell to £7.7 million from just under £8.3 million. The company reported an operating loss of £1.175 million, a substantial increase from the £71,000 loss recorded the year before. The pre-tax loss stood at £720,000, a significant shift from the £270,000 profit previously. Ultimately, the net loss reached £495,000, a stark reversal from the £134,000 profit achieved in the prior year.

The company attributed these struggles to a "long-tail effect" of sustained high inflation and peak interest rates across several of its most valuable markets. This economic climate compelled consumers to prioritize essential spending over discretionary purchases, which subsequently had a detrimental "knock-on effect" on John Smedley's wholesale operations.

Further compounding the challenges was a considerably weaker Japanese yen, which necessitated additional price increases in this crucial export market. This, in turn, eroded distributor buying power and led to a decline in forward order books for both seasons. Domestically, the UK government's autumn Budget was also cited, with significant increases announced for employers’ National Insurance, the National Living Wage, and business rates. These measures, implemented in April, are expected to further impact the current trading year.

In response to these headwinds, John Smedley has implemented a series of strategic measures. The company increased its prices – a step it had not taken for the previous three seasons. Furthermore, it has undertaken a business restructuring, which included redundancies, a reduction in the size of its product range to mitigate stock risk, and a pause on non-essential investments. These actions are designed to pave the way for a more profitable and cash-generative future.

Despite the financial difficulties, John Smedley has also made strides in other areas. The company successfully completed a significant project to replace its Wash & Dye house at its Lea Mills site. This upgrade incorporates the latest available equipment, leading to a substantial reduction in energy usage. Additionally, John Smedley continues to engage in interesting collaborations, such as the recent partnership unveiled with acclaimed actor Bill Nighy, demonstrating its commitment to brand engagement and innovation.