Swedish retailer, Clas Ohlson reported a slight dent in its profits due to a rationalisation of its store portfolio in the UK, revealing plans to shut its flagship Croydon outlet, as it continues plans to focus on small-format shops around London.
Sales for the retail group, which operates in Sweden, Norway, Finland, Germany, Dubai and the UK, were up 5% for the year to 7,990 million SEK (£7.3 billion). Operating profit, jumped 21% to 610 million SEK (approximately £557 million) for the year ended April 30, 2017. However, the figure allowed for a 107 million SEK (approximately £9.8 million) one-off cost related to rationalising its UK estate. Operating margin was 7.6%, up from 6.7% last year but would have been, 8.1% excluding non-recurring costs.
During the financial year Clas Ohlson closed six stores in the UK, including Newcastle in March. The previous year it closed one store, which resulted in a non-recurring cost of 10.5 million SEK (approximately £960,000) impacting its operating profit.
Last year it revealed plans to halve its UK store network and focus on a new format. The retailer now has seven stores in the UK, located in Liverpool, Manchester, St Albans, Reading, Croydon, Ealing and Kingston.
However, the future of the Croydon store will be short lived, as Clas Ohlson has revealed plans to close the flagship store, which was the first branch it opened when it started trading in the UK in 2008.
Discussing the UK market, Clas Ohlson lamented a slowdown in the British economy and poor consumer confidence, although added that “retail sales increased steadily throughout 2016”.The retailer also addressed a 16% increase in online shopping, which now accounts for 12% of UK retail sales and named its biggest competitors in the UK marketplace as Amazon, John Lewis and Currys.
Laying out its position within that market, it said: “During the 2016/17 financial year, we implemented a restructuring programme in the UK that focused on concentrating smaller-format stores to the London region. As a result, we closed six stores during the year in the UK market. We will continue to increase brand awareness and concentrate operations in the London region during the 2017/18 financial year.”
The retailer reported that the total annual cost savings related to the closure of all seven stores are an estimated 70 million SEK (approximately £6.4 million) when the restructuring has been fully realised during the 2017/18 financial year. While the store in Croydon remains open, the total cost savings are estimated at 60 million SEK (£5.5 million) on an annual basis.
The St Albans store, opened in October 2015, was the first of the small-format stores to open in the UK and has been designed to offer a more visible interaction between and e-commerce for the customer, presenting the product in a different way, with more digital solutions and inspirational elements. The second new-look branch opened in Ealing two months later.