Rapha expected to break even this year after addressing constant discounts
today Oct 29, 2019
The founder and chief executive officer of Rapha has said the upmarket cycle clothing business is on track to break even in the current financial year after 18 months of financial woes.
The luxury sportswear business, which was acquired by Walmart heirs Steuart and Tom Walton for £200 million in 2017, will soon publish its latest accounts.
Speaking in an interview with The Sunday Telegraph, Simon Mottram, who founded the brand in 2004, attributed the challenges Rapha has been facing over the past few years to a deep-rooted discounting culture.
“We’d taken our eye off the ball,” he said, describing how the company allowed seasonal discounting to become a permanent fixture throughout the year following the Walton takeover.
“We developed into so many product categories. It was fuelled by ever-increasing product ranges and product purchases, with discounts to clear the products.
“There’s a point at which the discounts at the end of the season become mid-season discounts and early-season discounts. And then Black Friday and it ends up being far too much of your business.”
The company racked up pre-tax losses of £50 million in the 18-months leading to January 2019, and a £30 million injection from the Walton brothers was needed to stop Rapha from defaulting on a £20 million bank loan.
The cycling brand, which had been once wooed by luxury goods conglomerate LVMH, was forced to make numerous redundancies, reduce its international operations and close the luxury cycling holiday business to combat losses.
Mottram explained how scaling back on discounting has helped turn the business around, but warned that it’s a slow-moving process, as the discount offer had grown to account for a third of sales. “It’s about having proper quality sales at the right margin,” he concluded.
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