Marks Electrical has reported a significant drop in profits despite increased sales, reflecting a shift towards non-premium products.
- The company’s underlying pre-tax profit fell from £1.6m last year to £820,000 for the six months ending 30 September.
- Sales increased by 9.3%, driven by strong growth in domestic appliances and consumer electronics.
- The average order value declined by 9%, indicating a consumer preference for lower-cost items.
- Future sales are projected at £120m with expected operational cost increases due to national insurance changes.
Marks Electrical, a prominent name in online electrical retail, has experienced a notable decline in profits despite strong sales performance in the first half of the year. The latest figures reveal that the underlying pre-tax profit has decreased significantly to £820,000, halving from the previous year’s £1.6m. This decline occurred alongside a 9.3% increase in sales, which totalled £58.8m. This boost in sales is attributed to substantial volume growth in major domestic appliances and consumer electronics.
The company’s financial report highlights a crucial shift in consumer behaviour, with the average order value falling by 9%. This change reflects a broader trend of shoppers opting for non-premium products, impacting Marks Electrical’s profit margins. In response, the company foresees a return to its premium-focused roots to mitigate the impact on distribution costs and enhance profitability.
Chief Executive Mark Smithson addressed the challenges faced by the company, noting, “The first half has included two of the largest structural changes the business has seen, the departure from Euronics and the implementation of our new ERP system, but despite these, we continued to remain profitable and cash generative.” Smithson also emphasised that these strategic changes are intended for long-term business success, despite short-term challenges.
Looking ahead, Marks Electrical aims to achieve £120m in sales and expects an EBITDA exceeding £4m. However, the company is preparing for an increase in operational costs, anticipating an annual impact of £750,000 from higher national insurance employer contributions. Smithson reiterated a commitment to driving profitable market share gains and reaffirmed the goal of becoming the UK’s leading premium electrical retailer.
Marks Electrical is navigating profit challenges while aiming for long-term growth through strategic adjustments and a focus on premium products.
