Fragrance Shop plans for recovery by renegotiating leases

Sanjay Vadera

Trafford Park-based The Fragrance Shop has unveiled robust trading for its financial year to March 31, despite being forced to close stores for the majority of the reporting period.

And it revealed it has renegotiated leases on a turnover model with around half of its landlords.

A significant growth in online sales largely offset the expected decline in store sales because of the series of enforced closures resulting from the measures taken to address the pandemic.

While the shape of the business has changed dramatically in the past 12 months, accelerating The Fragrance Shop’s transformation into a ‘phygital’ retailer, with a high growth digital business complementing the physical high street network, that has accelerated the business’s existing trajectory.

During the reporting period the business saw Key stats summary online sales growing by 164%, as the proportion of sales from its online channels almost tripled from 20% of the group total to 56%.

Overall retail sales at the group fell by 4.7% as the business faced a sharp drop in footfall in town centres and shopping centres and the impact of temporary store closures to comply with lockdown regulations across the UK.

Overall, gross retail sales were £128m for the year to March 2021, while group EBITDA was £15.4m, pre-exceptional items.

Unsurprisingly, store sales were down 47% as The Fragrance Shop had to close stores for around seven of the 12-month period.

However, in the financial year the business still opened one new location, taking its estate to 199 stores. It expects to open six more this financial year, including shops in Cambridge and Exeter.

Despite lockdown, closed stores were re-purposed to offer a click and fulfil service to limit the need for furlough and better manage stock levels across the whole business.

The group said the work done to create a new digital platform in 2019 meant The Fragrance Shop was well placed to accelerate online growth to meet demand as UK shopping habits changed rapidly because of the pandemic.

And the strength of its brand built over two decades also enabled it to pivot assertively online. Innovations online that have driven growth include:

  • The ‘fragrance match’ service that guides customers through the huge range of options available and helps them make the right choice, whether they are shopping for themselves or buying a gift
  • The three-tier MyTFS membership programme offering 20% off vouchers, excusive offers and free delivery is growing rapidly
  • The integration of the ScentAddict subscription service into the main Fragrance Shop platform now lets customers try one of 500 new scents every month for £12

However, the business insists that shops are still vital.

Because buying fragrance is a sensory experience, The Fragrance Shop still expects a strong, thriving store network to be a major part of its future.

The profound impact on the high street saw stores closed for around seven out of the 12-month period and a significant drop in footfall when they have re-opened. The business expects footfall in town centres to remain subdued for some time and will adapt the business to address this new environment. It is working closely with landlords to agree terms that mean shops can remain economic and part of a recovery on the high street

It has successfully renegotiated leases on a turnover model with around half of its landlords aligning property costs to future expectations on footfall.

Despite the challenges faced as a non-essential retailer, The Fragrance Shop has managed to modestly grow its store estate and maintain employment at pre-pandemic levels.

Strong collaborations with brand partners have helped the business to maintain supplies and have product in stock. During the year, top performing brands have included Chanel and Dior as luxury fragrance continued to perform.

Chief executive, Sanjay Vadera, said: “Unprecedented times have presented us with enormous challenges, but I couldn’t be prouder of the way everyone in the business has pulled together to get us through this difficult period.

“A combination of self-help and government support, for which we are grateful, has steered us through turbulent times and left us well placed to rebuild, as the economy gets back on its feet.”

He added: “The work we’d already done on strengthening our online platform provided the foundations on which we were able to grow our digital offer to meet the dramatic change in customers’ shopping habits. This shift to online shopping is only going to grow stronger and we see this as a big opportunity.”

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