Hudson Group reported €747,697 in pre-tax profit during the financial year ended 31st December 2023, a substantial drop from the €7.6 million recorded in the previous year.

This was announced in the Annual Report for 2023 of Hudson Holdings Limited, the parent company of the group, released on Friday.

Hudson Group is involved in the retail and distribution of sportswear and fashionwear in Malta and internationally, primarily in Italy, Cyprus, Morocco, Algeria and Nigeria. It represents a number of international brands locally, including NIKE, Intersport, Ted Baker, Converse, Crocs, Kiabi, and Mango, among others.

Earlier this year, Hudson Malta Sales Ltd, one of the companies within Hudson Group, announced that it recorded a pre-tax profit of €347,944 in 2023, a drop of 39.2 per cent from that of 2022 (€572,188).

During 2023, the group opened 29 retail stores across six countries, mainly in Morocco and Malta, as it continued its retail expansion programme. As at the end of 2023, it had 93 stores in six countries, including six new outlets in the recently-opened Mercury Towers in St Julian’s.

Hudson Group stated that due to these new openings, together with those of 2022, it registered a growth of 36 per cent in retail operations, with retail revenue also rising by €22.8 million to €85.6 million.

However, the group also suffered from a decrease in demand for retail goods primarily brought by inflation. This prompted the achieved retail turnover to be “significantly below expectations.”

This decreased demand also had an impact on the group’s wholesale business, but to a lesser extent since new clients were onboarded.

When combined, Hudson Group’s revenue increased by 12.5 per cent from the that of 2022 (€161.6 million), totalling €181.8 million.

Cost of sales increased by 12 per cent to €128.3 million (2022: €114.5 million).

The group stated that even though an increase in retail revenue typically leads to higher gross profit margins, the lower-than-expected demand resulted in Hudson Group having to clear extra inventory through discounting. This led to the gross profit margin to remain flat at 29 per cent, with gross profit amounting to €53.6 million.

Given the increase in the number of stores operated by the group, operating and administrative costs were also on the rise, going up by €12.1 million to a total of €48.2 million (2022: €36.1 million). In this regard, employment costs increased by €4.2 million, rent costs by €1.7 million, and other direct costs to operate retail by €3.4 million.

These costs include a negative exchange rate impact of €2.5 million originating from Hudson Group’s business in Nigeria.

Finance costs for the year increased to €5.2 million (2022: €3 million), reflecting the increased borrowings to finance the group’s expansion, together with the increased level of interest rates.

In terms of its balance sheet, Hudson Group’s total assets increased by 16 per cent to €160.3 million, mainly due to the significant increases in inventories and trade and other receivables.

A dividend was not recommended by the Board of Directors, with the balance of retained earnings amounting to €16.6 million being carried forward to the following financial year.

In the report, Hudson Group’s Directors also stated that due to the lower demand experienced in 2023, the group has curtailed its expansion of new retail stores in 2024, focusing on “managing its inventory position and improving efficiencies.”