Matchesfashion, the luxury retailer, has suffered widening losses in its latest financial accounts as it looks to recover from the impact of the Covid-19 pandemic. While the company’s auditor, PWC, has issued a going concern warning, Matchesfashion remains confident that ongoing discussions with lenders will yield positive results. The company has also emphasized the support it has received from its backers and the range of options available if its financial covenants are breached. Although Matchesfashion faced significant challenges during the pandemic, recent improvements in trading and the appointment of CEO Paolo De Cesare indicate that the company is making progress.

According to the accounts filed at Companies House, Matchesfashion faced a difficult period up until January of this year. The company’s revenue for the latest year decreased from £433.8 million to £392 million, while gross profit dropped from £163.4 million to £122.3 million. This led to an operating loss of £34.7 million compared to £3.7 million the previous year, resulting in a net loss of £36.5 million, a significant increase from £5.89 million in the prior year. The advent of lockdowns caused by the pandemic had a profound impact on consumer behavior, causing a decline in demand for high-end apparel associated with events and social gatherings. However, there was increased demand for categories that catered to working from home or staying at home.

The pandemic also disrupted the supply chain, leading to delays in product arrivals. Matchesfashion worked closely with its brand partners to mitigate the effects of these delays, but the shortened selling windows affected margins. Moreover, high inventory levels combined with the disruptions caused by Covid prompted management to take action to reduce finished goods available for resale and increase sell-through rates through markdowns. Inventory levels decreased from £144.2 million to £79.6 million by the end of the year. Sell-through rates for the spring/summer and autumn/winter seasons increased to 93% and 81%, respectively.

As a result of these challenges, PWC included a warning in the accounts, stating that there is “material uncertainty” about Matchesfashion’s ability to continue as a going concern if trading does not improve. Both the “base case” and “downside case” scenarios suggest a risk of breaching banking covenants in January 2022. However, there are positive indications of improvement. Matchesfashion’s confidence in finding a solution through discussions with lenders aligns with the strong demand reported by fashion retailers in all sectors, from value to luxury, for clothing, accessories, and footwear associated with going out. Furthermore, the commitment of backer Apax to Matchesfashion is evident through the recent £85 million financing injection it provided to the business.

[Link 1:]( Matchesfashion Ventures – Official Website
[Link 2:]( The Guardian – Fashion Section