Sunglass Hut profits slumped in 2010 as its focus on promotions hit margins. Despite sales nudging ahead from £35.6m to £35.9m, operating profit dropped 16% to £2.6m.
In documents filed at Companies House the retailer said: “The main contributing factor [to falling profits] was a higher level of promotional discounts, resulting in a lower gross margin percentage.”
Sunglass Hut, owned by Italian eyewear giant Luxottica Group, said the UK market is “highly competitive”. Despite warning of the uncertain economic outlook, the 57-store retailer said it would look to open new shops in the UK this year. A new outlet store is planned for early 2011, along with nine new department store concessions.
Retail Week Knowledge Bank director Robert Clark said the eyewear specialist has ramped up promotional activity in the face of increasing competition.
He said because of the product area’s high gross margins rival retailers view eyewear as an attractive market to be in and so competition is fierce, leaving Sunglass Hut “vulnerable to attacks from both specialists and non-specialists”.
Clark added that the air travel chaos throughout the year would have hampered the retailer, which has 15 stores in airports.