Superdrug has fallen into a loss while its sister value chain Savers returned to profit for the first time since 2005 in a change of fortunes for the health and beauty retailers.
Superdrug, which along with Saver is owned by Hong Kong-based AS Watson, recorded a £1.4m operating loss in the year to December 29 against a £10.8m operating profit the previous year.
The retailer said exceptional depreciation charges of £15.1m dragged its performance down. It is understood this is related to its store estate. Before the exceptional charge, Superdrug generated a profit of £13.7m.
Sales at the retailer edged down 2.6% to £1.02bn despite a 2.3% increase in the UK health and beauty market. Superdrug said this was due to a footfall decline on the high street outside of London in the face of low consumer confidence.
In addition, online growth resulted in greater competition in the health and beauty market, while heavy discounting across the grocers meant more people incorporated health and beauty as part of their weekly household shop.
In the year Superdrug refreshed its store estate, focusing on those in the south east of England. It also launched new own brands, such as its B make up and skincare range, and introduced exclusive ranges.
Superdrug said it expects the economic environment to “remain challenging for the foreseeable future and the squeeze on personal incomes to continue”.
It will continue to diversify its product range into “better performing complementary categories” as well as introducing new brands online and in store and developing its online offer. It also plans to improve its operations and make them more efficient to ensure it can deliver its value for money products.
Superdrug’s cut-price sister retailer Savers recorded a £6.9m operating profit in the year to December 29, moving it back into the black from a loss of £368,000 the previous year.
Last year sales surged 13.4% to £214m as the retailer opened 11 new stores in the period. It now operates from 232 stores. Gross margins increase 28.5%from 27.8% in 2011.
In the fifth year of Savers’ turnaround programme the retailer “rode the wave of success of discounters as customers changed their shopping patterns to save money on essentials”.
Savers launched its turnaround plan after suffering losses of £45.8m in 2007.
The retailer now plans to focus on its core product offers across household, hair and health and it will introduce categories and own brand products