Ann Summers has reported a 3% increase in sales but a dip in profits for its full year, as rising product costs reduced its gross margins.

According to accounts filed at Companies House for the year ending June 30, 2010, turnover increased to £118.5m, and operating profits dipped by £500,000 to £5.6m. Pre-tax profit fell from £6.9m to £5.7m.

Chief executive Jacqueline Gold said: “Although increases in product costs resulted in reduced gross margins, tight cost control mitigated some of these pressures.”

Gold said short-term profits were likely to be squeezed further by the tough economic climate but the retailer will continue to focus long-term growth. She said the retailer has a strong financial position with healthy cash flows and no debt,
and will focus on a multichannel business model.

Gold said: “During some of the most trying trading conditions of the last 20 years, Ann Summers has managed to buck the trend in our sector and increase revenues during the year.

“Our year-on-year profit figures are down, but I am confident the investment will make our brand more robust and relevant.” 

Ann Summers will focus on cost control and improved stock management. It will invest in online and in product innovation.

According to Retail Week Knowledge Bank online sales could account for as much as 10% of group sales in 2010.

Retail Week Knowledge Bank consultant Wendy Massey said
the retailer was wise to invest in online and predicted it would push online to 15% of sales in the next three years.

Massey said despite the jump in revenue Ann Summers was still not up to its 2007/8 levels of £121m turnover.