Trends & Features

Overtrading warning

In encouraging news for the UK sports & leisurewear industry, 161 of the top 626 companies in the market are growing at more than 10 per cent per annum and making healthy profits.

However, according to industry analyst Plimsoll, while many of these companies are leading a sustainable recovery, there are other businesses whose headline grabbing sales growth masks falling profits.

David Pattison, senior analyst and author of the new Plimsoll Analysis, explains: “Firstly, it makes a nice change to have some positive news to report. 161 growing, increasingly profitable companies have either tapped into new, fast growing revenue streams or are just the best performers in the old ones. Anyone struggling to make the most of the recovery should look at these companies and ask themselves: ‘What do these guys sell, make or do differently to me?’.”

However, Pattison says there are 72 companies achieving eye-catching sales growth, but their profitability tells a different story. “Essentially there are two types of growth in the market – good vs bad,” he explains. “72 companies have achieved over 10 per cent sales growth, but in doing so have seen their profit margin collapse. They are simply overtrading.

“The accolades of growth are all well and good, but the bills need paying too. More worrying, seven of these companies have been loss making for two years – even with double digit sales growth, I doubt they will make it to a third.”

On the subject of companies getting it wrong at both ends of the scale, Pattison offers this warning: “While the market continues to recover and the 161 top performers show the way, there are 146 companies facing a very bleak future indeed. Losing sales, profits and probably most of their remaining options, these companies have been rated as ‘Danger’ in our report. Time is running out and only a takeover or a rapid turnaround is likely to redeem their situation.”

Readers are entitled to £50 off the new Plimsoll Industry Analysis – Sports & Leisure Wear report. Call 01642 626400 for further details and quote reference PR/CT70.

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