Threads giant Coats hurt by de-stocking, tough comparisons as sales dip

But at least there were no shocks as market conditions and trading in the quarter were in line with its expectations — as is its outlook — the industrial threads and global footwear component manufacturer said in a trading update Wednesday.

The overall constant currency revenue decline was 7%, underpinned by acquisitions, as organic revenues dipped 20%, “up against a very strong prior year comparator… [reflecting] the continuation of the widespread industry de-stocking in Apparel and Footwear”, it explained.

It gave only percentage figures for the period, rather than putting actual monetary amounts on them.

As also expected, Apparel revenues declined 22% in the period, reflecting a continuation of trends seen in Q4, “with de-stocking by customers adjusting to more subdued consumer demand and excess inventory levels”.

It was the same in its Footwear division, down 23% organically, hit by those similar de-stocking drivers. At least reported divisional revenue increased 58% year-on-year in the period, but that did include major first-time contributions from the recent acquisitions of Texon and Rhenoflex. 

Revenue in Performance Materials dipped 13% in the period, largely the result of the customer insourcing of a significant PPE contract in H2 2022, its said.

Meanwhile, it described operating profit margins as “resilient… supported by strategic projects and tight cost control”.

Coats added: “With trading in the period in line with expectations we continue to anticipate full year 2023 performance consistent with the board's expectations, with a second-half weighting, underpinned by the contribution from acquisitions, associated synergies and strategic projects.

“The group remains very well-positioned in its markets, as the global partner of choice for winning brands and with a clear leadership position in innovation and sustainability”. 

Coats will release its interim results on 1 August.