Old stock challenges suppress profit at high-end furniture retailer

The investment firm backing Heal’s has reported a “difficult period for profitability” for the furniture retailer.

According to its latest filed accounts for the year ended 16 September 2023, Wittington Investments stated that Heal’s revenues in the period were flat at £37.4m compared to £37m of sales in 2022.

Commenting on the performance of Heal’s during the period, the firm said: “Heal’s has experienced a difficult period for profitability as inflationary pressure squeezed margin and increased the cost base (with the exception of its new Tottenham Court Road lease).

“Revenue remained materially flat at £37.4m, however the dual challenges of supply chain and wage inflation drove a 50% reduction in operating profit to £0.8m (£1.6m in 2022). Perhaps the biggest challenge was in dealing with old (returned and cancelled) stock, which led to a very significant write down which suppressed profit.

“Heal’s continues to generate a positive operating profit and EBITDA and the underlying performance remains sound. Excluding the write-down of stock, profit would have increased from the prior period.

“The strategic focus of the company going forward is to capitalise on its new store layout on Tottenham Court Road and to grow its online presence, which now accounts for half of sales revenue.”

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