Rapha is planning to continue to cut down on the rate of discounting its products as it tries to stem the flow of losses.
The British cycling apparel brand will soon publish its latest accounts following the takeover by RZC Investments in August 2017, a private-equity firm run by heirs to the Walmart fortune, Steuart and Tom Walton.
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The year results to January 2019 are expected to show a pre-tax loss of more than £50m, according to the Telegraph, though CEO Simon Mottram has said he expects Rapha to break even this year and repay £10m in bank loans.
In the 18 months following the takeover, the Waltons had to inject £30m into the company to prevent it defaulting on a £20m loan from HSBC. It also made numerous redundancies to staff as well as cutting down overseas operations and closing its luxury cycling holiday business, with Mottram saying “difficult decisions” were necessary.
He added that “we’d taken our eye off the ball” following the Walton takeover, allowing discounted rates on products to become an almost permanent fixture throughout the year. Rapha has since halved its level of discounts, and will continue to phase out discounting while trying not to lose sales it had become so reliant on for turnover.
“We developed into so many product categories,” Mottram told the Telegraph. “It was fuelled by ever-increasing product ranges and product purchases, with discounts to clear the products.
“There’s a point at which the discounts at the end of the season become mid-season discounts and early-season discounts. And then Black Friday and it ends up being far too much of your business.”
He added on the company’s future pricing strategy: “It’s about having proper quality sales at the right margin.”
Rapha was founded in London in 2004 by Mottram and enjoyed rapid growth in the early part of this decade, though has not always turned a profit. It was bought for £200m by RCZ in 2017 following a bidding war between several private-equity firms.