Hughes Electrical warns of Brexit impact as customers turn to rentals

Hughes' Lowestoft branch. Picture: NICK BUTCHER.

Hughes' Lowestoft branch. Picture: NICK BUTCHER. - Credit: Nick Butcher

Electrical retailer Hughes has sounded a warning over the impact of Brexit on consumers' shopping habits as it posted improved profits for the last financial year.

The group, which employs 900 people and has a head office in Lowestoft, saw turnover edge up to £113.48m in the year to March 31, 2016, up from £111.77m the previous year, while pre-tax profits rose to £2.45m from £1.99m a year earlier.

Online sales rose by 14% while shop sales remained static, though rental income increased by 4% over the year.

But the EDP/EADT Top100 company said the coming year may present challenges 'as the Brexit referendum has caused a hit to consumer confidence and business activity', but plans to step up its online and rental operations to compensate.

'The directors now believe that the market may struggle to grow this year and the limited trading evidence since this event supports that view,' the company said in notes to the accounts posted at Companies House.

'It is expected that product prices will rise by up to 10% over the rest of the year due to the fall in sterling but sales volume will fall due to consumer caution.'

The company is forecasting no net sales growth in the coming year, but foresees a move towards more people renting rather than buying, with a trend for people to lease homes, cars and mobile phones 'spilling over to electrical appliances'.

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That has already benefited Hughes' Dial A TV (Rentals) subsidiary, where the rental income and rental base rose 24% in the past year.

Hughes wants to sell and lease back up to five of its smaller premises, to raise finance it can invest in stock to fuel further rental growth, while it also wants to improve its website to maximise online sales and 'seek efficiencies in service operations' to mitigate the effect of the National Living Wage, which came into force in April.

Gross sales margins also rose by 0.5%, despite more business being generated by lower-margin channels such as trade and online, bringing to an end a downward trend fuelled by online and supermarket competition which has cut the number of retailers on the high street in the past decade.

The group's net pension liability fell to £9.845m as it continues to make a £1.5m annual payment, though with falling gilt yields since the Brexit vote 'much of this deficit reduction will have been reversed', the accounts noted.

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