Encouraged by low interest rates and the need to gain a competitive edge, 36% of the Top 306 UK leathergoods retailers have spent the last three years gradually increasing their levels of debt. These companies are now faced with severe commercial disadvantage: debt is threatening their survival in the industry and exposing them to their competitors as potential acquisition opportunities. A company’s financial health can appear misleadingly favourable on the surface. The latest Plimsoll Portfolio Analysis – Leather Goods Retailers exposes the facts that many of the top 306 companies in the UK leathergoods retailing industry would rather we did not know.

110 of the top 306 companies in the UK leathergoods retailing industry have seen their total debt position increase by almost 79%. Over the last three years, debt has risen to such an extent that it now accounts for almost 18% of total sales, severely compromising levels of profitability. Even with interest rates at their current low level, interest payments are consuming nearly all the profits and forcing 39 of these companies into loss. If interest rates rise, this weight of debt will become an increasing burden and adversely affect the ability of these companies to manage their repayments.

David Pattison, senior analyst at Plimsoll Publishing Ltd, comments: ‘Keeping up with the news on a company, its shareholders, suppliers and competitors, does not always give an indication of its true financial health. Our analysis exposes company myths where they exist in the UK leathergoods retailing industry. I think people will be both surprised and alarmed by what is revealed.’ This brand new Plimsoll Portfolio Analysis – Leather Goods Retailers suggests that by removing interest payments, profitability would increase to 14.1%, well above the industry average margin of 1.6% making the companies ideal for acquisition.

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