River Island profit halves as it ramps up investment

The fashion retailer’s operating profit tumbled from £80.6m to £35.1m last year, Retail Week can reveal.

Money was once again directed to investment in technology and service, as in the previous year, when profits also declined.

Sales dipped to £919.7m from £944.5m in the year to December 29, 2018, when River Island’s online and wholesale operations grew.

River Island chief executive Ben Lewis, who hands over the reins to former Wiggle boss Will Kernan at the end of this month but will remain on the family-owned retailer’s board, told Retail Week that the results reflected rising costs and a focus on ensuring the retailer remains relevant in a changing environment.

He said: “Despite challenging market conditions, we have maintained our long-term vision to build a resilient business and maintain focus on our customers and their fashion needs.”

Investment in innovation was essential to the continued success of the 70-year-old business, Lewis added.

He told Retail Week: “Quite simply, it is more expensive to maintain our level of service to our customers and we have to work harder just to stand still.

“As we evolve and adapt to our customers’ ever-changing needs, we will continue to invest for the long term in important areas such as product, technology, stores, service and our people.”

Lewis said River Island remains committed to a bricks-and-mortar presence even though that carries high costs, and the property estate is being actively managed to ensure it has “right locations on fair terms”.

He warned that retail landlords must also adapt to new realities and called for business rates reform.

Lewis said: “We are seeing continued growth online and with our wholesale partners, and we remain committed to retaining a store presence on the high street, all of which we see as key areas to support growth for the future.”

However, he added: “Unless rents fall, and they are falling in some places, retailers will close stores or not open. Landlords need to pay serious attention to that. What we’re interested in are fair terms. Then there’s the rates piece – it’s inequitable and not proportionate.”

River Island’s investment has been in areas such as personalisation, including merchandising of its website according to what individual customers and shopper segments want, and the adoption of AI and machine learning in the supply chain to improve accuracy of stock delivery.

Lewis’ move from chief executive to non-executive director had prompted some speculation that a sale of 300-store River Island might be on the cards. However, Lewis was adamant that “the business is not for sale”.

He said: “I am proud to step aside leaving a robust business and a talented team in place. Over the past 30 years, River Island has been one of the best-loved names on the high street and online, and we are confident that this will continue.”