River Island reports profit slump due to stock management challenges

Highstreet fashion retailer, River Island, has published its financial statement for the 53 weeks ending 31 December 2022.

The family-owned business started the year well, however, "business subsequently suffered from both falling demand for its fashions and rising stock levels". This affected margins, whilst underlying costs rose.

Turnover for the year increased by 6% to £715.3 million, up from £675.1 million the year prior.

Gross profit slumped to £51.6 million, down £117 million. The company blamed the profit reduction on "the combination of costs to clear excess stock and cost of goods inflation".

These factors, combined with operating costs, led to operating profit reducing to £1.9 million, a significant decrease from £62.5 million the year prior. After-tax, this number was reduced to £1.5 million.

EBITDA stood at £17.7 million, down by 78.2% from the year prior.

Following Richard Bradbury's appointment as Executive Chairman at the start of this year, significant changes have been made, which are starting to bear fruit.

The company asserts that 2023 will be "a year of transition". In particular, product ranges have been refocussed and a new leadership structure has been developed with several new senior hires. For example, last month, River Island appointed Jane Eskriett and Richard Grainger as its new Co-Managing Directors.

What's more, the business has invested in revamping brick-and-mortar stores as well as the digital business to boost the customer experience and spending. In June, the retailer revealed a new 21,000 sq ft concept store, called River Island Studios, at Manchester’s Trafford Centre. The space combines the physical and digital with interactive fitting rooms and self-service tills.