Liberty Retail, the company behind the iconic Liberty London store and online platform, experienced improved performance in the year leading up to February. However, despite these positive signs, the company still faced operating and net losses during this period. The challenges of 2020 have further compounded the difficulties faced by the business, as footfall in London has plummeted and the retail industry continues to face pressures.

In terms of the 2019/20 figures, Liberty Retail’s revenue increased to £93.14 million from £85.22 million, with sales per square foot of its flagship store rising from £1,234 to £1,309. Gross profit also saw an increase, reaching £45.3 million compared to £42.8 million the previous year. Although the company managed to narrow its operating and net losses, it still reported an operating loss of £4.19 million and a pre-tax loss of £6.7 million.

During the year, Liberty Retail focused on refurbishing its flagship store, making improvements to various areas such as dress fabrics and fragrances. The company also experienced significant growth in its online operations, Liberty Online, thanks to enhancements in logistics processes, website functionality, stock range, and availability.

However, the current situation presents the most significant challenges for Liberty Retail. With a prolonged lockdown and the continued closure of the flagship store, the business faces severe consequences. The company acknowledged the potential risk of breaching its financial covenants in a downside scenario, particularly if demand remains low for an extended period and the flagship store is forced to close during the crucial Christmas trading period.

The retail industry as a whole is under immense pressure, as evidenced by Frasers Group withdrawing its financial guidance. The latest lockdown measures have further hindered the sector’s recovery. Despite these challenges, Liberty Retail’s parent company, Liberty Zeta Limited, has committed to supporting the business, and additional financing has been secured. Liberty Retail accessed an extra credit facility of £15 million through the UK government’s Covid business support scheme, and shareholders have committed £5 million to the company in case its financial covenants become unstable.

The current trading conditions for Liberty Retail are challenging, with a significant decrease in footfall since the last financial year. The company expects this trend to continue into 2021. The flagship store heavily relies on international tourists and visitors engaging in social activities in London, as well as the local working and residential population. However, international tourism is expected to be severely impacted in the medium term, and demand in the short term will primarily depend on the local population. Central London is experiencing historically low levels of office workers and individuals participating in social activities, further exacerbating the situation.

Despite these challenges, there is a silver lining for Liberty Retail as the company has witnessed a significant increase in demand on its website in the current financial year. However, this growth has not fully offset the impact of the store’s closure. Nevertheless, Liberty Retail remains determined to navigate through these difficult times and secure its future in the retail industry, thanks to the support of its parent company and additional financing.

Useful links:
Liberty London Official Website
UK Government Guidance for Retailers during COVID-19