Gymshark calls an end to its fast-growth trajectory

Gymshark has admitted its fast-growth days are probably behind it after a challenging year that saw it reduce its workforce for the first time.

The West Midlands-headquartered retailer reduced its administration staff by 170 people, including 80 as part of a major retrenchment from North America, and it closed offices in Hong Kong and Mauritius.

In a statement by the directors signed off by co-founder and chief executive Ben Francis, they said they “anticipate that the previous growth trajectory that the group experienced in different times will not continue in the same way”.

However Gymshark is “confident that it can continue to grow its business meaningfully whilst improving profitability and has clear plans in place to deliver this”.

Revenues were up by £72m to £556m in the year to July 2023. Pre-tax profits were down by more than half, to £13.1m, although the company’s newly-preferred profit KPI, EBITDA, did show a small increase.

The annual increase in Gymshark’s revenues is at its lowest since 2018:

Gymshark has been a major business success story for the West Midlands and the UK in recent years.

American investor General Atlantic paid $300m (£230m) for a 21% stake in Gymshark in 2020 in a deal which confirmed Gymshark’s unicorn status and made co-founder Ben Francis Britain’s youngest billionaire.

Gymshark’s Ben Francis

The business had grown from being a student-led business to a retail phenomenon in part by developing a large and loyal following through social media and brand ambassadors focused on the fitness and conditioning market.

Gymshark successfully launched its first permanent retail store, in London’s Regent Street, in October 2022 and is now preparing to open at the UK’s busiest shopping centre, Westfield Stratford City in London, this summer.

Its first store added around £10m of revenues and was responsible for just under half of the annual growth in UK revenues, despite not being open for the full financial year.

Gymshark generates 80% of its income overseas, with the United States contributing £250m.

The ongoing impact of rising inflation, hitting raw material and labour costs as well as consumers’ discretionary spending power, hit sales, especially in the United States.

Gymshark changed tack at the start of 2023, when it cut two-thirds of its North American workforce and began plans to close its regional sourcing offices in Hong Kong and Mauritius.

It focused on execution, looking to improve its customer interaction, increase the levels and relevance of new product and clear historic stock.

It had successfully reduced its stock balance by £22m at the year-end – negatively impacting margins, but positively impacting cash flow – and saw “strong growth and improved profitability” in the second half of the year.

In a video posted online aimed at Gymshark’s customers, Francis was very upbeat about Gymshark’s performance and prospects.

He said: “Last year we posted our biggest revenue number ever and some incredible profitability improvements. This year we’re going to be launching another store, our first premium athleisure range, a distribution deal with Selfridges, expansion of Gymshark into Dubai and the wider Middle Eastern area, a 12-month New York City pop-up store and our most ambitious events plan ever.

“Last year was big for Gymshark and this year is going to be even bigger.”