Lounge sales increase but profits fall due to rising costs of expansion

Underwear retailer Lounge reported profit before tax of £5.5m for the year to June 30, 2023, down 33% from £8.1m in 2022.

Lounge said this came a result of “increased administrative expenses” as part of its ongoing investment in marketing, advertising and other brand activities to “optimise profitability and growth”.

Sales for the year were up 6%, reaching £67.9m, which Lounge credited to its international growth and the opening of four new stores in the UK.

The retailer saw a 20% increase in its number of active customers in all markets, which rose from 778k to 931k during the year, while total orders were also up 10% to 1.41m.

Bold international debut

Looking ahead, Lounge said it remains laser focused on becoming “the biggest and best underwear brand in the world” as it plans to open its fifth UK store in Cardiff later this month.

Lounge is also making its international bricks-and-mortar debut later this year with an opening in Westfield Centro, Oberhausen, Germany.

In its annual financial report, Lounge said its ongoing expansion remains at “the forefront” of its growth and confirmed it is eyeing further growth in the Americas and Australia.

Lounge founder and chief executive Daniel Marsden said: “A focus for us over this period has been creating an omnichannel experience where people can shop online as well as in real life.

“Our retail stores aim to be more of a brand experience piece just as much as a revenue and profit function, and is a vision which will continue to be rolled out in the next financial year. As we look ahead at the next 12 months, we are ambitious and positive around the opportunities for growth.”

Co-founder Melanie Marsden said: “We pushed on in the brand’s missioon to empower women focused on that life-long brand statement of ‘Comfort Made Sexy’. The year was jampacked with products that captured the hearts of our audience, but was also the beginning of the brand’s second layer apparel becoming a core focus.

“The brand has felt bolder than ever before and strived to gain more global exposure with inspirational campaigns from collaborations, out-of-home advertising to a pop-up strategy that led to the future of IRL for Lounge.

“And we’re not stopping there, this year we’re going bigger, better and more luxurious than ever before.”