CASHMERE specialist Johnstons of Elgin has warned its sales could fall more than 30 per cent amid the coronavirus crisis as it highlighted the importance of the UK agreeing a trade deal with the European Union.
After Johnstons posted strong results for 2019, chief executive Simon Cotton underlined the scale of the challenge posed by the impact of the coronavirus and the resulting lockdown for a company that is one of Scotland’s manufacturing success stories.
Johnstons has built a global customer base for a range of products made in Scotland, which includes scarves, jackets, coats, jumpers, and cardigans.
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However, lockdown restrictions imposed in March have impacted on sales of the company’s products. The company had to shut its mills in Elgin and Hawick temporarily.
“Almost all our team have been furloughed for some period, as our mills and retail stores had to close during lockdown and have only recently fully re-opened,” said Mr Cotton.
He added: “We expect sales for 2020 to be more than 30% down and are preparing for a slow recovery through 2021.”
Mr Cotton said Johnstons was in good shape to cope with the uncertainty businesses face, after maintaining profits at around £6.4m in the year to December 31.
The privately-owned company has a strong balance sheet and has secured funding from Royal Bank of Scotland under the Government-backed Coronavirus Large Business Interruption Scheme.
“Despite the very difficult situation in 2020, we are extremely optimistic about the future in the longer-term,” said Mr Cotton.
He noted the company makes products for leading luxury fashion brands that continue to outperform the general market. Demand for the products the company sells under its own brand is being boosted by the consumer shift away from fast fashion.
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However, Mr Cotton thinks it will be some time before turnover returns to 2019 levels.
He noted: “We do a significant amount of export business around the world and currently benefit from tariff free access to the European Union as well as to the Japanese market which is very important to us.
“We are hopeful that agreements will be reached which allow us to continue to trade without duties to these important markets.”
The update from the business comes amid concern the UK could complete its exit from the EU without a deal being in place. That would result in tariffs being imposed on exports to Europe. The transition period is due to end on December 31.
On Monday Cabinet Office minister Michael Gove told MPs the UK would be leaving the Single Market and the Customs Union then “regardless of the outcome of negotiations with the EU over our future relationship”.
He noted: “From January 2021, traders who are exporting goods to the EU will need to make export declarations and ensure they have the right certificates and licences required for entry.”
Mr Cotton said the support given by the Government to businesses has been extremely helpful. He cited the business interruption loan and the support received for the company's furlough programme under the Coronavirus Job Retention Scheme.
“Going forward we hope to see attention given to supporting increased investment in manufacturing so that we can maintain our technological momentum and our strong focus on innovation and creativity,” added Mr Cotton.
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Asked whether the company planned to make any posts redundant Mr Cotton said: “Our focus at this moment in time is firmly on the next few months, which are our busiest season for delivering products ready for the Autumn / Winter season.”
The accounts for James Johnston & Co of Elgin show the group’s sales fell to £77m in 2019 from £79m in the preceding year. Exports increased to £29.9m from £27.3m.UK sales fell to £47.1m from £51.7m.
The company opened a new Johnstons of Elgin store opened in Edinburgh during the year. This traded ahead of budget.
A small store on America’s Nantucket Island closed at the end of the year.
The company made £6.41m profit before tax in 2019 against £6.5m last time.
The average number of employees increased to 1,044 from 1,024.
The company paid dividends totalling around £1m during the year.
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