Liberty performance improved pre-pandemic, but 2020 has been tough

By

Sandra Halliday

Published
Dec 23, 2020

Liberty Retail — the company that operates Liberty London’s flagship store and webstore — increased its revenue and gross profit in the year to February. But it still made an operating and net loss for the period, albeit both of those latter figures were narrower than in the previous year.

And 2020 has been challenging for the business, as London footfall has plummeted and retail pressures show no sign of lessening.

First those 2019/20 figures. Revenue rose to £93.14 million from £85.22 million, while its flagship sales per square foot rose to £1,309 from £1.234. Its gross profit reached £45.3 million, up from £42.8 million and its operating loss was £4.19 million, less than the loss of £8.53 million a year earlier. Its pre-tax loss was £6.7 million, down from £8.58 million and the net loss was £8.34 million after a loss of £11.24 million in the previous year.

The company continued to refurbish its flagship store during the year, refreshing the dress fabrics and fragrance areas, as well as other parts of the store that customers don't see. And its Liberty Online operation saw "significant growth" due to improvements in logistics processes, website functionality, stock range and availability.

But what’s most interesting is what has happened since and while it didn’t give specific figures, it’s clear that Liberty has major challenges to face in the event of a prolonged lockdown keeping the doors of its flagship firmly closed. 

The filing contained information about its potential risk in a “downside scenario” of breaching its financial covenants. That scenario could happen if demand stays low for 12 months alongside “a forced closure of the flagship for three months during the peak Christmas trading period, being October through to January”. The store is currently closed due to just such a forced closure and looks likely to remain shut after Christmas.

Coming days after Frasers Group withdrew its financial guidance, it’s just another example of how pressured retail is and how the latest lockdowns are undermining the sector’s recovery.

But that doesn’t mean the downside will happen. Its parent company Liberty Zeta Limited said it’s committed to supporting it and the company has accessed extra financing too. Liberty signed up for an additional credit facility of £15 million back in July linked to the UK government’s Covid business support scheme. And its shareholders have a further £5 million contractually committed should its financial covenants look shaky.

So how bad is trading at present? As mentioned, there were no specific figures but Liberty understandably said it has seen a big footfall drop since its last financial year end and its sees no let-up as we move into 2021. 

When it’s allowed to open, the flagship’s footfall is very dependent on international tourists, as well as visitors to London for social activities, and the local working and residential population. Management expects international tourism to be "severely impacted" in the medium term and short-term demand to be predominantly dependent on the remaining areas. However, as we know, office workers and people visiting London for social activities are also at a historically low level in central London at present.

That said in the current financial year, its website has experienced a “significant increase in demand”, although this hasn't fully offset the impact of closing its store.