Moss Bros blames supply woes for second profit warning in two months

Moss Bros boss Brian Brick said the year ahead would be

Moss Bros has blamed stock problems and falling consumer confidence for a second profit warning in two months, resulting in a cut to its dividend. 

The menswear retailer said that it expected its profit to be “materially lower” than current market expectations in the year ending Jan 26, 2019. City analysts had forecast the company’s net income to come in at £6.2m for that period.

The news sent shares in Moss Bros to their lowest level since 2012, down by as much as 33.5pc at 39p in morning trading. It also added to the dark cloud over the British high street, as Carpetright scrambled to raise emergency cash and Mothercare sought more breathing room as it negotiated with its creditors.

Moss Bros blamed falling sales on a change in supplier, which resulted in a shortage of stock across all of its products in store and online. It expects the problem to continue until “late spring”.

The problem has echoes of the chicken shortage that struck fast food chain KFC last month, when it was forced to close more than 550 of its stores for several days and offer a stripped back menu at others. The chain blamed “operational issues” at a depot of its new distributor, DHL, meaning chicken was not delivered on time. The chain ultimately reappointed its former distributor, Bidvest, to handle some deliveries.

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Moss Bros also warned that fewer customers were coming into its stores and it was seeing less demand for hire suits.

Brian Brick, chief executive officer, said: “In common with many UK retailers, the year ahead looks like being a very challenging one and we have taken action early to be sure we protect the underlying strength of the business.”

The firm said it would continue to invest in growing parts of its business, including online, product development and its bespoke Tailor Me service, but would trim its dividend to just 4p a share for this financial year, down from 5.89p in 2016.

Just two months ago, the retailer revised its pre-tax profit forecasts for the 52 weeks to Jan 27 to between £6.5m and £6.8m - below what City analysts had predicted, blaming lower footfall. The retailer will announce full-year results next week.

Patrick O’Brien, an analyst at Global Data Retail, said Moss Bros' announcement did not give many assurances about a “bounceback” in demand and comes on the back of a particularly weak December period.

He added that the company could struggle in the long term because of falling demand for men’s suits as more office workers opt for casual workwear or have flexible working arrangements that don’t require them to be in the office wearing clothes: “Men don’t need as many suits."

Mr O’Brien said many retailers were being tougher with suppliers because of rising costs that they did not want to pass on to customers. 

“They’re really trying so hard to either play hardball with suppliers, to switch suppliers, to threaten suppliers with being switched and always risks come with that, as we saw with KFC.”