Moo battles Covid sales slump
Thursday, January 14, 2021
Sales at luxe online print specialist Moo collapsed by nearly 80% as the pandemic struck last spring, and the previously fast-growing business was forced to take rapid restructuring actions in order to survive.
In its financial results for 2019, just filed, the group outlines how the impact of Covid-19 had a dramatic effect on its operations.
In stark contrast to industry peer Moonpig, where the pandemic caused sales to boom, demand for business cards and Moo’s other business-related print services tanked.
In his commentary chief executive Richard Moross said that January and February 2020 had been “two of the strongest months in our history”, but from mid-March things went rapidly downhill.
“April saw a near 80% decline in revenues year-over-year, as business meetings, travel, conferences and general business confidence were hit, with subsequent impact to Moo.”
Fortuitously the business had refinanced its debt in January 2020 with a four-year loan of $8m (£5.9m) and a revolving credit facility of $5.25m.
More than 70% of Moo’s sales come from North America, and it started reporting in dollars last year.
“Moo ended 2019 in its strongest-ever financial position, having refinanced our debt facilities and with the largest cash balance in our history. We were going to need it,” Moross stated.
The business implemented a ‘MakeIt Through’ plan in response to the sales slump.
Chairman Darren Shapland said the business had also “worked with its suppliers to schedule out payments to allow the company to preserve cash while it recovered its momentum”.
Between September and December 2020 Moo also raised an additional $7.8m in convertible loans from investors that included the UK Future Fund.
Moross praised the “incredible hard work of our teams” and said sales had recently recovered “to more than 60%” of prior year levels.
“These critical actions came with a significant cost,” he noted.
“We were forced to make the necessary reductions in headcount for the business to survive. As a founder and builder of businesses… it was with great personal sadness that I and others on the team had to say goodbye to many of our Moo colleagues due to our restructuring efforts.”
Moo had previously employed around 585 staff. The firm had not confirmed its current headcount at the time of writing.
The group's auditors BDO also flagged a "material uncertainty" around the impact of Covid-19 on sales, working capital, and its ability to meet its covenants.
Moo's 2019 results also reflected problems due to changes to Google’s search engine algorithm, which impacted Moo’s organic search ranking until Q4 and crimped sales growth.
Sales for the year grew by 3.5%, or 5.4% at constant currency, to $139.6m. It shipped a record 1.4m orders, and also won its biggest-ever order for $1m-worth of custom notebooks.
Sales to the USA and Canada topped $100m, while ‘rest of the world’, mainly the UK, nudged up by 1% to $38.8m.
Operating profits fell by 31.5% to $1.56m, and the bottom line loss was $699,000 (2018 loss: $780,000).
Moo said it also benefited from new contract terms with key equipment provider HP, “resulting in a very strong improvement to cost of goods sold”.
Moo has manufacturing facilities in Dagenham, Essex and in Lincoln, Rhode Island in the USA.
Moross said that despite ongoing uncertainty due to the pandemic, he was confident in the future for the business.
He stated: “We believe that, barring another major disruption in demand, our existing financial resources along with contingency actions we can take are sufficient to carry us forward in the face of ongoing headwinds.”