Marks Electrical experiences a significant profit drop despite a rise in sales.
- Profits fall by almost half in the first half of 2024 to £820,000.
- Sales see a 9.3% increase, reaching £58.8 million within six months.
- Consumer trends shift towards non-premium products, affecting average order value.
- Anticipated national insurance hikes to cost the firm an additional £750,000 annually.
In a notable shift, Marks Electrical reported a stark decrease in profits for the first half of 2024. Despite experiencing robust trading, the company’s profits almost halved, falling from £1.6 million in 2023 to £820,000. The adjusted EBITDA also saw a decline, slipping from £2.3 million to £2 million. This financial downturn comes amidst a 9.3% increase in sales, which totalled £58.8 million.
The rise in sales was attributed to strong volume growth in major domestic appliances and consumer electronics. However, the retailer observed a 9% drop in its average order value as consumers opted for non-premium products. This shift in consumer purchasing behaviour reflects a trend where shoppers are trading down when making large purchases.
Looking ahead, Marks Electrical maintains an optimistic outlook, forecasting £120 million in sales and an EBITDA exceeding £4 million. Nevertheless, the company has expressed concerns regarding the impending increase in national insurance employer contributions, set to take effect in April, which is expected to incur an additional cost of £750,000 per annum.
The company’s chief executive, Mark Smithson, highlighted challenging yet strategic developments, noting the business’s departure from Euronics and the implementation of a new ERP system. He emphasised these changes are intended to position the company for long-term success, albeit they present short-term challenges.
Smithson acknowledged the effects of consumers trading down, resulting in a skew towards non-premium products, impacting distribution costs. As part of its strategy, Marks Electrical plans to pivot back to a premium-focused model to mitigate these impacts. Smithson stated that while this adjustment might slow revenue growth, the focus remains on driving profitable market share gains and creating long-term value, aiming to establish the firm as the UK’s premier premium electrical retailer.
Marks Electrical confronts a challenging financial landscape by adapting its business strategy for sustained growth.
