Missguided is set to close down its only London store less than three years after it opened.
The loss-making store – which marked the online retailer’s first-ever permanent bricks-and-mortar store when it opened in November 2016 – will close down at the end of February.
The 20,000sq ft store reportedly had two years left on the lease but Missguided was able to negotiate with Westfield in order to exit early.
The news comes after accounts recently filed with Companies House saw Missguided reveal a loss after tax of £46.7 million for the 12 months leading up to 1 April 2018. That compared with a £1.6m loss in the previous 12-month period.
However, group turnover for the year increased 4.9% to £215.91 million.
The retailer said that its two UK stores in Westfield Stratford City and Bluewater shopping centre were a success, but they have generated insufficient revenue to cover operating costs.
Despite this, Missguided’s Bluewater store, which is located just outside the M25 in Kent and opened shortly after the east London branch, will continue to operate as normal.
In addition, the retailer is poised to open its first international franchise store at Dubai Mall on Friday this week.
Missguided has seen losses deepen after what it said was an "extremely challenging" year.
The firm, which began as a purely online retailer before adding four bricks-and-mortar stores, said the shops were too large and cost more to run than they brought in.
RPA Perspective Missguided also blamed "premature" investment in extra management for its worsening financial position. "The year has been an extremely challenging one from which the brand emerges stronger," Missguided said in its strategic report for the period.
"During the year, in order to support and enable future growth, a fresh tier of management was introduced to the business. We now believe that this development was premature, materially increasing the cost base and diluting the influence of our founder [Nitin Passi]."
Missguided said its retail store business model, consisting of outlets in big shopping malls, had been "well received" by its customers.
However, the revenue they brought in was "insufficient to cover their operating costs, primarily due to the stores being significantly too large".
The retailer said it had addressed the problem of its high cost base by spending £1.3m on reorganisation and redundancy costs.
"After a positive first half year, we anticipate returning to historic levels of profitability in the current year," it added.
Missguided has collaborated with MENA retail giant Azadea Group on a franchise deal to open 15 stores in the region in the next three years, including online stores and an app.
It is set to open in Dubai first, followed by Saudi Arabia, Kuwait and Lebanon.
Nitin Passi, founder and CEO, said of the firm’s expansion to brick and mortar: "Online is our focus and that is what our business is about. Our customers want to shop online retail, but it is a great opportunity for us to open a [physical] franchise in the UAE.
Missguided offers international shipping to the UAE and is available on local platform Namshi, which offers next day delivery. But Passi says the demand is enough to warrant a wider presence in the region.
“The Middle East, [the market] is pretty much untapped. We do a little bit of business there but not a huge amount. In the last three years, we’ve seen a lot of growth with one of our wholesale partners which is Namshi.com,” he said. “The reality is there is a shift from brick and mortar to online, but customers are still shopping in store and I think it’s still a great opportunity for customers to interact with a brand and touch and feel its products. From what I’ve seen, the mall culture is still very much dominant in the Middle East, and e-commerce is a much smaller part of the mix.”
