Hornby has announced a pre-tax loss of £10.1m and “lower than expected sales” leading to shares plummeting by 20% this morning.
Revenue at the toy manufacturer has also dropped 20% to £37.5m and losses after tax rose to £9.9m.
A Hornby spokesperson told Retail Sector a key factor in the company’s struggles was heavy discounting of stock by previous management, leading to retailers buying it at a discount which “doesn’t necessarily mean its been sold”. A spokesman added: “There is still stock at lower prices in distribution places.”
The company also blames “insufficient investment in tooling [creating new models]” which led to “late placing of purchasing orders with suppliers”. When asked if choppy waters on the high street were affecting Hornby, the spokesperson said: “Hornby is acknowledging that the retail market, is difficult, but bare in mind they have a number of different distribution centres. One of them is the independent hobbyist shops, they tend to be more robust.
“The data I’ve seen is that those shops are not seeing the same decline as some the other members of the retail sector, they have quite a loyal customer base. The people who go to these shops are collectors and collectors by definition are not price sensitive, they may be economically sensitive, but not as much as the people who go into an Argos or a Smyths to buy a train set for Christmas for a 10-year-old.
“So with the other channel, the big boxes [complete train sets], its as tough as you would understand. But a significant proportion of its [Hornby’s] distribution is in the hobbyist sector and that’s quite robust.”
Hornby CEO and interim chairman said:”In the first seven months that I have been at Hornby, we have assessed our position and confronted the reality of the situation in which we find ourselves. Tough decisions have now been taken and we are currently laying down the foundations for our future success.
“There is a new energy in the business and I am excited with our plans as we re-engage across both domestic and international markets with these well-loved brands.”