Luxury fashion brand Temperley has received a warning from auditors about its financial health, which could potentially pose difficulties for the company. The warning comes as the brand experienced mounting losses in 2018, highlighting the challenging environment in which it operates. However, CEO Luca Donnini remains hopeful and optimistic, citing improvements in execution, product lines, supply chain, and commercial results that are expected to lead the company to break-even in 2020 and profitability in 2021.

In recent years, Temperley has undertaken an operational transformation program aimed at repositioning itself in the market and focusing on operational improvements. As part of this initiative, the brand has consolidated its bridal offerings at its flagship Mayfair store and opened a directly operated store in the prestigious Dubai Mall. Furthermore, Temperley has streamlined its collections to achieve economies of scale and expand its customer base. It has also prioritized retail and e-commerce growth, forging a partnership with online platform Farfetch and consolidating its UK retail offerings under the House of Temperley brand.

Despite these efforts, the company experienced a 15% decline in revenue during the period covered by the latest accounts. This decline has been attributed to challenging retail trading conditions. Additionally, the brand faced a decrease in gross margin, dropping from 51% to 43%, primarily due to an additional provision made against slow-moving stocks. By the end of the financial year, Temperley reported net liabilities of £16.6 million, an increase from £13.3 million the previous year. Turnover for 2018 amounted to £9.69 million, compared to £11.37 million in the previous year. The operating loss also widened from £1.5 million to £3.24 million, with pre-tax and post-tax losses increasing to £3.34 million from £1.53 million.

The auditors’ warning raises doubts about the company’s ability to continue as a going concern. However, it remains uncertain whether this warning is simply a legal obligation or a genuine concern for the brand’s future. It is worth noting that Temperley’s high profile, highlighted by its celebrity clients such as the Duchess of Cambridge, Emma Watson, and Keira Knightley, has undoubtedly played a role in establishing its visibility in the industry.

Despite the challenges faced, Temperley management believes that the company now possesses the necessary operational structure, personnel, and trading plans to leverage its brand popularity. The brand’s strategic initiatives and focus on operational improvements are key factors contributing to its optimism for the future. As a result, the industry eagerly awaits to observe how Temperley’s performance will evolve in the coming months.

Useful links:
1. [Temperley’s official website](https://www.temperleylondon.com/)
2. [Farfetch – online platform partner](https://www.farfetch.com/)