Cost of living squeeze hits Marks Electrical: Profits down 33% as consumers trade down

Marks Electrical, the retailer of household appliances, has reported a one-third drop in profits last year as cost-conscious consumers downgraded their purchases amid the cost-of-living crisis. The company, which went public on the London Stock Exchange in 2021, said that the trading environment had put pressure on margins as customers "remain highly price-conscious".

Despite increasing its market share in the domestic appliance sector from 2.5 percent to 2.8 percent, Marks Electrical's adjusted earnings fell by 33 percent to £5 million for the year ending March 31. This was despite the firm achieving record turnover for the year, with revenue rising by 17 percent to £114 million.

"In the current trading environment, consumers remain highly price-conscious, which given our premium focus, continues to have an impact on our average order value, resulting in customer order volumes growing faster than revenue," said CEO Mark Smithson. He added: "This impact has limited our ability for margin expansion which we expect to continue in the short-term, when taking into account the relatively fixed cost of delivery. ".

"Whilst I continue to be personally frustrated about our margin progression during the year, I remain confident in our long-term growth prospects, and continue to be impressed by our ability to deliver market share gains profitably, against a fiercely competitive backdrop, whilst maintaining the highest levels of customer service standards in the industry," he said.

Marks Electrical, known for its range of appliances such as dishwashers and ovens, along with tech items like games consoles and TVs, has seen its shares soar by 70 percent since its debut on London's AIM market over two years ago.

The firm acknowledged that the squeeze on demand had persisted into the first quarter of the new financial year. In its latest trading update released on Wednesday, it reported "continuing pressures on customers trading down".

Nevertheless, Marks Electrical revealed that April, May, and June had witnessed "strong trading", characterised by double-digit revenue growth.