Fashion, luxury and lifestyle news aggregator - April 2020

Posted: 05/05/2020

As lockdown loiters, luxury brands in particular may be facing a disproportionate effect on their annual profitability and cash flow. This is due to the months of March and April typically being the sector’s peak time for full-price sales.

Richard Branson’s empire is suffering its first big casualty with Virgin Australia entering into administration, leading Branson to beg for state aid and pledging to mortgage his home and luxury holiday resorts in the British Virgin Islands to save it. This change of heart comes after Branson previously suggested that weak airlines should be allowed to fail.

The Boohoo Group has fought through the overshadow effect of the pandemic to achieve a profit-soaring year. Although both its profits and revenue took a slight dip in the first instance, they are now on the up. The company claims to have discovered its strengths of flexibility and agile working, and has adapted to a new way of operating.

Likewise, numerous stores have adapted and continued to operate in one way or another. Despite John Lewis’ overall sales being down 17%, its online sales have spiked 84% since March with its customers now purchasing “less sofas, more scrabble”. It has also launched a virtual styling experience online, showing its commitment to customers’ wellbeing during this time.

River Island, Fenwick and many others have resorted to bolstering their online capabilities after closing stores. After some also temporarily stopped e-commerce operations, warehouses across the sector are now successfully implementing social distancing measures, providing personal protective equipment (PPE) to workers and even digital thermometers to keep them safe through the pandemic.

By contrast, the French Court of Appeal has found that Amazon’s warehouses in France have not effectively implemented safety assessments for its employees. The court ruled that until it does so, it will face significant fines for every non-essential delivery (up to €1 million per day).

Elsewhere, Amazon was reported to have cancelled promotions for Mother’s and Father’s Day due to its inability to meet existing demand during the pandemic. For the same reason, the group is expected to delay the landmark ‘Prime Day’ from June to at least August. It is suggested the impact of this could be as much as $300 million.

Showing gratitude and support to our courageous frontline workers, Mulberry joined the national effort to manufacture the much-needed PPE. Burberry has donated 100,000 items of the life-saving protective equipment, as well as announcing that it will not use the Government’s furlough scheme. Its senior managers have also agreed to a 20% pay cut.

In similar acts of kindness, Joules has sourced and donated gowns and masks. Primark and John Lewis created care packs for the NHS staff working back to back shifts, providing them with fresh, clean clothes and other well-deserved items.

Ted Baker opted to help its local communities facing challenges, donating 100% of its new online pop-up profits.

Returning to the ‘new normal’

Whilst it appears we remain firmly in the midst of lockdown, companies such as John Lewis have started to draw up plans to gradually re-open stores when the lockdown measures are lifted. Groups have been established in the business departments of the Government to draw up guidelines for the safe return of employees in different environments.

The British Retail Consortium has also started to prepare guidelines to support the re-opening of stores, learning from supermarkets in recent weeks, including measures such as limiting entry and exit points, using floor markings to outline social distancing and keeping changing rooms closed.

Promise that such social distancing measures can be effective may also be taken from supermarkets beginning to lay off the first wave of the 45,000 temporary workers hired at the peak of the outbreak.

Government support measures

Although the NHS looks to have survived the first wave of Covid-19, the Prime Minister has reiterated that it is too early to lift the lockdown restrictions. Throughout April, the Government has therefore continued its efforts to aid all businesses, and Rishi Sunak (the Chancellor) has expanded existing measures and announced additional steps to support various businesses across the sector. Some of the most noteworthy changes are set out below:

HM Revenue & Customs updated its guidance on the Government’s furlough scheme for employees. For more information, see here.
The Coronavirus Business Interruption Loan Scheme (CBILS) has now been expanded to include businesses that could otherwise be offered standard commercial terms. Personal guarantees are also no longer required for facilities below £250,000. For more information, see here and here.
A new Coronavirus Large Business Interruption Loan Scheme (CLBILS) has been introduced. CLBILS offers medium and large sized businesses – a group previously ineligible for CBILS – with facilities of up to £50 million (depending on annual turnover). For more information, see here.
The Bounce Back Loan Scheme (BBLS) has been introduced to provide up to £50,000 for small businesses across the UK. As an alternative to CBILS, BBLS is 100% guaranteed by the state, and is available from the beginning of May. Crucially, the scheme is advertised as a fast-track finance scheme with cash arriving within 24 hours of approval. For more information, see here.