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More red ink for Global Brands as revenue falls by nearly half

Troubled Global Brands is pivoting towards a stronger focus on a direct-to-consumer (DTC) business model in the wake of Covid-19, after the division showed “significant growth” as a percentage of revenue in the first half to September 30.

The company reported a net loss attributable to shareholders of US$122 million for the period, $32 million higher than for the same time a year ago, while following on from the full-year loss of $598 million reported in July, and $400 million for the prior year.  

The DTC business has grown from 12 per cent of total revenue in the first half of last year to 22 per cent this year and the margin is 66 per cent, compared to 35 per cent for the overall business. 

“Our DTC model will continue to develop and will impact positively the future profit generation of the group,” CEO Rick Darling said in a statement

The business segment comprises brands the company owns rather than manages, including Fiorelli, B New York, AirBands, Ely & Walker and Aquatalia. All showed strong growth during the half and “are well on their way to establishing strong direct relationships with their relevant consumer markets,” the company said in a stock-exchange filing.

“While new brand opportunities emerge, we continue to selectively add new licenses, expecting these to have a positive impact on our FY2022 results.”

Global Brands was already dramatically restructuring before the Covid-19 crisis hit, culling underperforming brands it managed on behalf of others and paring back its infrastructure, especially in the US and Europe. It is shifting its focus to brands that have a strong heritage and loyal consumer base.  

The pandemic contributed to a revenue drop of 46.1 per cent to $290 million in the September half.

“The Covid-19 pandemic has posed unprecedented challenges to our lives and to the industry,” said Darling. “Amidst this uncertain backdrop, the group has transformed its business and focused on growth in new areas. We have acted decisively to reduce operating costs and to preserve cash to ensure we emerge from this crisis a stronger and more agile business.”

Operating costs were cut by $51 million in the first half, and the company achieved a modest trading profit of $15 million before more writedowns pushed it into the red. 

Darling said more brands would be joining the portfolio soon. “I am optimistic as Global Brands emerges with a renewed focus into 2021 and beyond.”

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