STUDIO RETAIL SUFFERED MAJOR LOSSES BEFORE BEING SAVED BY FRASERS GROUP
It has been revealed that Studio Retail made a loss of more than £75m in the year it was rescued by Mike Ashley’s Frasers Group out of administration.
The Accrington-headquartered online retailer collapsed in February 2022 owing over £80 million to its creditors. Frasers Group, the owner of Sports Direct and House of Fraser, bought Studio Retail in a £26.8m deal.
Now newly-filed accounts with Companies House show Studio Retail slumped to a pre-tax loss of £75.6m in the year to April 24, 2022, having made a profit of £56.6m in the prior 12 months. Its revenue, including credit interest, also dipped from £578.5m to £556.9m over the same period.
A statement signed off by the board said: “Despite a strong trading start to the financial period, Studio’s revenue and gross profit excluding credit account interest declined to £424.4m and £119.8m respectively.
Supply chain issues resulted in significant delays in the arrival of key seasonal stock for Studio’s peak trading period in the build up to Christmas. Difficult market trading conditions saw Studio maintain a large stock holding into the New Year despite heavily discounting multiple category ranges.”
In February this year it was reported that Studio Retail’s chief executive had stepped down.
It was also reported that the company is to create 30 jobs in its first major expansion drive since being rescued. Clues about Studio Retail’s trading since the end of April 2022 were included in Frasers Group’s half-year results at the end of last year.
Frasers Group said: “It is our expectation that SRL’s [Studio Retail Limited] customer base has seen and will continue to see a significant reduction in real earnings as a result of the current cost of living crisis and, whilst the adverse impact payment and arrears performance has been less severe than anticipated to date, it will continue to be felt in the future.
Judgement has therefore been exercised in applying a post model adjustment of £20m (24 April 2022: £40m) to the output of the impairment model in arriving at the provision.”
They went onto say: “This reflects management’s best estimate based on the information available to them and has been calculated using broadly the same methodology as that used at 24 April 2022, although the probability weightings applied to the relevant scenarios have been modified to reflect management’s latest view of the risks to customer payment and default performance posed by the current macro-economic outlook.
We note that the unprecedented level of uncertainty around the cost of living and the UK economy as a whole, and the impact this will have on Studio’s customer base will continue to cause challenges in assessing bad debt on a forward-looking basis.”
