Brexit, Covid, and economic uncertainty blamed as Wiggle Chain Reaction Cycles records £97 million loss

The summer of discontent for the cycling industry continues, with news of slumping bike sales coming in the wake of a sobering annual report from Wiggle Chain Reaction Cycles. The online retailer posted a pre-tax loss of over £92 million for 2022, compared to £14.5 million for the previous year, as the company’s former chief finance officer blamed the aftereffects of Covid, Brexit, and ongoing economic uncertainty for the significant drop.

In documents filed at Companies House in late July, Mapil Topco Limited, the group which covers both Wiggle and Chain Reaction’s retail operations, recorded a loss before tax of £97,041,000 for the year up to 30 September 2022, almost seven times greater than the losses sustained in 2021.

Overall sales also fell by 30 percent, from £360 million in 2021 to £252.5 million last year, 38 percent of which was generated outside the UK.

However, Wiggle’s own performance appears slightly less bleak than its parent company, recording losses of £26,841,000, a still-significant drop from the £1.3 million loss reported for the previous year, but which the company claims is “in line with expectations”.

> UK bike sales fall even further after dropping to lowest level in 20 years

In their strategy and business review, the group – which was acquired by Berlin-based online retailer Signa Sports United (SSU) in December 2021 – also noted that UK sales remain seven percent higher than in 2019, the year before the start of the Covid-19 pandemic, and that the proportion of own-brand sales increased from 26 percent to 30 percent during the year.

Capital additions of £14.5 million were also made by the business, mainly focused on improving back office systems, as well as the controversial rebrand of Wiggle and Chain Reaction’s online shops. The group say the heavily criticised updates will “improve the customer experience and therefore conversion and sales”.

While the current challenging state of the UK economy was blamed for “subduing consumer demand” (UK sales fell by 32 percent compared to 2020 and 2021), the company claimed its drop in international sales of 26 percent was “driven mainly by the full year impact of Brexit reducing sales into the EU, where higher duty and fulfilment costs have necessitated higher pricing”.

The acquisition of Wiggle CRC by Signa Sports United during the period in question also brought “significant one-off legal and professional and staffing costs”, adversely affecting net profit by over £36 million, though SSU also fully repaid and waived all shareholder debt and intercompany loans, amounting to £312 million, as part of the deal.

In a directors’ report submitted by chief finance officer Adrian Bruce, who left the company earlier this year, Mapil Topco Limited said: “The effects of the current economic uncertainty have been felt throughout the retail industry in recent months and the future impact of these uncertainties remains difficult to predict.

“In addition, the Group is suffering from the aftereffects of the Covid pandemic. The pandemic, and the lockdown periods in particular, led to a pull forward of revenue [which] meant that customers who ordinarily purchase regularly have accelerated their purchasing into the lockdown period and have subsequently purchased less in the periods following the lifting of lockdown restrictions.”

Wiggle CRC has been contacted by road.cc for comment.

“If you voted for Brexit, please realise this is 90% because of your decision”: UK cycle distributor FLi ceases trading

Wiggle’s worrying losses are yet another sign of the challenging times for the bike industry. Yesterday, road.cc reported that the Bicycle Association’s latest findings on the state of the UK cycle industry suggest that bike sales have slumped once again, months on from the national trade association reporting they had fallen to a 20-year low in 2022.

The news comes courtesy of the Bicycle Association’s mid-year report for the first half of 2023, which suggests that mechanical bike sales have fallen by eight percent and e-bike sales by 12 percent. Furthermore, the total market value of the cycle industry has dropped by eight per cent compared with the same period last year.

Concerningly, the numbers come from a low starting point, with last year seeing bike sales in the UK dropping to the lowest level in two decades, 27 percent below pre-Covid levels as the cost-of-living crisis gripped.

As Wiggle claimed in their recent report, the implementation of Brexit protocols over the past few years has also had a damaging impact on the industry.

> Ribble Cycles sees "encouraging" improvement in performance after making £5 million loss in 2022

In July, as FLi Distribution ceased trading with immediate effect, the Huddersfield-based distributor’s director blamed the “red tape and barriers to trade” currently affecting businesses for his company’s demise.

FLi – which began life in 2008 as FLi Race Team Management, before transitioning to distribution – was known for supplying KTM bikes to the UK for over a decade, a relationship which ended in April this year.

The distributor notified dealers and suppliers of its decision to cease trading earlier this summer, with director Colin Williams citing the impact of Brexit, the complexities and restrictions surrounding UK and EU trading, and the difficulties facing the bike industry in the post-Covid lockdown period as the main reasons behind FLi’s disappearance.

“If you voted for Brexit, please realise this is 90 percent because of your decision back in 2016,” Williams said. “I have no idea what will be next, but as the people close to me know, whatever it is, it’ll be better than the last 18 months.

“I’m done fighting, I’m done with the red tape and the barriers to trade. It hadn’t been fun for some time, so the time was right to end it now, life is too short. The relief now the decision is made is amazing, but I am so sorry for any negative impacts it will have on anyone and I’m doing my best to resolve any and all of them where I can.”

Issues stemming from Brexit and the post-Covid lockdown purchasing malaise were also cited earlier this month by Ribble as factors behind the company’s £5 million loss in 2022 – though the company encouragingly reported a “strong volume in growth demand of 10 percent” for the first half of 2023, amidst a restructuring process to mitigate risk.