Fat Face feels the pain of a lesser sterling

The British clothes retailer has felt the pain of a lesser sterling as the increasing pressure of fluctuating currencies has dented its profits. On the back of the profits’ slump, Fat Face has negotiated easier debt terms to cope with the weakened pound.

In a full year report issued earlier this month, the company's management announced the completion of a “covenant reset” to an external financing agreement to secure greater “headroom”.

Fat Face reported pre-tax annual profits in 2016 fell 9 percent from 24.2 million pounds to 22 million pounds, regardless the 7.2 percent rise in revenue to 220.2 million pounds.

Brexit takes its toll on Fat Face’s profits

Fat Face directors explained the decline in profits saying this was a direct result of the Brexit, as UK's decision to leave the EU led to a subsequent devaluation of sterling.

Market sources concurred, pointing out that rising costs associated with currency pressures were the ‘death’s kiss’ for Fat Face as it makes all its products and raw materials purchases from the Asia-Pacific region and does so in U.S. dollars, leaving it too exposed to the currency fluctuations.

Despite the slip in profits, the brand continued its physical network expansion with the opening of 10 new stores and by increasing overall square footage by 11.8 per cent through extensions, relocations and new openings.

On the upside, online sales grew by 20.6 percent year on year, now accounting for 18.2 percent of the company’s total sales.

Regarding the near future, Fat Face is about to embark with a further expansion overseas, leveraging its successful foray into the U.S.

Image:Fat Face Web