In a challenging development for the UK’s prominent online fashion retailer, Very Group, a key credit insurance provider, Allianz Trade (formerly Euler Hermes), has reportedly reduced its coverage for suppliers. This decision has heightened financial pressures on the company, citing concerns about heightened non-payment risks in the current economic climate.
As reported by The Times, Allianz Trade has scaled back its coverage, refraining from commenting on the matter. Very Group becomes the third major UK fashion retailer, following ASOS and Boohoo, to experience a reduction in credit insurance within a year, mainly attributed to significant declines in online sales amidst economic challenges.
The unavailability of credit insurance often leads to suppliers requesting upfront payments, constraining a retailer’s cash flow. As of April 1st, Very Group held approximately £62.2 million in cash reserves.
A spokesperson from Very Group commented, ‘One of our credit insurance providers has reviewed its coverage for the Very Group, a step taken with several retailers due to market conditions. Nevertheless, we’re pleased to note that other credit insurers are maintaining or expanding their coverage.’
The company’s pre-tax profits decreased from £58.5 million in the previous year to £11.7 million in the 39-week period ending on April 1st. Additionally, adjusted EBITDA experienced an 8.6% year-on-year decline, totaling £211.4 million in the same period.
Despite these challenges, the group’s revenue remained stable at £1.6 billion during this period, although it was impacted by a 2.5% decrease in retail sales, attributed to a highly competitive and promotional environment within the fashion industry.
