Rapha reports losses for the seventh year in a row

Even worse than last year (from £12M to £22M) I think due to some restructuring and streamlining their operation, but still, at what point does a business that has a turnover of over £100M actually start to make any money?

I know that it’s owners are billionaires and they don’t have to care and it doesn’t have to actually make any money, but they must be what? One of the best known cycling clothing brands in the world? Some of my friends who know nothing about cycling know who Rapha are, and if you can’t trade that into the black; what are you doing?

Some of my friends who know nothing about cycling know who Rapha are, and if you can’t trade that into the black; what are you doing?

They’ve just started doing a range of multi-sport kit, so maybe that’s a nod to the direction they’re going to go. They also have a new CEO, Fran Millar, who besides being David Millar’s sister, was also pretty much Brailsford’s number two at Team Sky then moved within INEOS to become CEO of Belstaff, another loss-leading clothing brand… hmmm…

Somewhat ironic that Rapha not being in the black given the colour of most of their clothing.

Hasn’t it just been the worst year in living memory to be selling premium cycle clothing?

Give them a break for once.

“ Even worse than last year (from £12M to £22M) I think due to some restructuring and streamlining their operation, but still, at what point does a business that has a turnover of over £100M actually start to make any money?”

Amazon had huge turnover and huge losses by the time it first made a profit in 2003. In 2000 it lost $1.4 BILLION!

Part of it is the nature of their sale – I’ve read they are depreciating 100m of ‘goodwill’ (ie what was paid for the business above the value of the assets) over 10 years.  It doesn’t look nearly so negative if you take that out.

I think the founders did well to cash out when they did. I’ve still got some of my very early Rapha ‘smartwool’ tops.  They were really good quality.  I bought one in the last 10 years and the material quality is worse (it’s pilled in a way the old ones didnt’) and the fit is worse (body is shorter).

They stood out when they started by being design led rather than pure performance.  But some of the ‘classic’ high end brands upped their game and theres loads of design-led competition now (Universal colours comes to mind).  It’s a much tougher market.

Isn’t it very tax efficient to report a loss?  no need to pay any tax whatsoever?  isn’t that how apple / amazon etc basically wangle it so they pay very little

Stop doing so many colours, minor variants, and edge case accessories (shoes, helmets) because we all know they will not sell and be massively discounted at the end of the season

Sort out the women’s range because wtf is it not the same as the men, and no woman I know is going to wear a skort or a crop top on a bike, jees

Just send me the consultancy fee in the post, thanks!

Hasn’t it just been the worst year in living memory to be selling premium cycle clothing?

Sure it’s probably never been a worse time to be in the leisure clothing business, but this is the 7th year of losses which includes the COVID bump that saw many cycling companies break records for sales and profits…and yet.

Isn’t it very tax efficient to report a loss?

@DT78, it can be the only reason I can think of that makes any sense.

Somewhat ironic that Rapha not being in the black given the colour of most of their clothing.

Pink?

Rapha has been reporting losses……every year since it was taken over by a RZC investments. I’d imagine a good part of that is the £200m buyout cost then put on the resulting company to service.

Mottram made a profound difference to Road cycling clothing – one that those newish to cycling probably don’t appreciate. Back in 2004 luxury bike clothing meant you had to go about in garish Assos looking like a Power ranger. But as said above others have caught on and the market has diversified with a lot more cross discipline riders and niches within niches. They rode the wave of having Wiggins wearing yellow Rapha in all his retro modness leading out Cav down the Champs-Élysées when we still thought Wiggo was cool and Team Sky and their success a novelty. The veneer has long since peeled off, the brand is owned by another faceless big business and it’s just another brand sold everywhere and often on the sales rack.

the brand is owned by another faceless big business

TBF to the Walton brothers – no, not those Waltons, the super wealthy owners of Walmart, those Waltons they are apparently pretty keen mountain bikers, so they’ve not just bought Rapha as part of some souless corporate buyout.

Weird. I’d remembered the wiggo/cav thing as being in Rapha as well but here they are in Adidas:

Such a powerful marketing campaign that they’ve managed to rebrand a kit historically!

Rapha made a huge difference when they started. Not just clothing but Rouleur magazine. Just think of the copycats and the high end clothing now available.
I still have my first jerseys from them which are in great condition – along with all the collaborations like independent fabrications, Smithfield nocturne – can’t say that about some of the others. This was when £69 was thought to be a lot. They were still one of  the first to introduce goretex, insulation to ride gear.

Yes they need to streamline – it has gotten a bit crazy- but they are still no1 on my go to list.

Isn’t it very tax efficient to report a loss?  no need to pay any tax whatsoever?  isn’t that how apple / amazon etc basically wangle it so they pay very little

Yes, but you need to balance the book somewhere.

e.g. Starbucks UK reportedly made a loss in the UK by agreeing to pay Starbucks NL an absolute fortune for their logo.

Why does Starbucks NL own the Starbucks logo, and why do they not share the IP for free internally as one big happy family?  Because NL have very low taxes on profits made on intellectual property.

So Starbucks makes a profit, just not in the UK.

Same with Apple IIRC, the subsidiaries pay an offshore holding company for the phones at a wholesale price that doesn’t let them make much profit at all, so they make little or no profit in the market they’re operating in, but Apple itself ends up with a huge cash reserve.  Their problem is they can’t import that cash into the USA without paying tax, so it’s kind of struck.

It’s why companies like things such as R&D tax breaks in western countries, it’s a convenient way to move money into them to pay wages without it ever appearing as profit.

Weird. I’d remembered the wiggo/cav thing as being in Rapha as well but here they are in Adidas:

Wow, yes – a good bit of revisionism in my post up there! Especially embarrassing as I know one of the people responsible for the first batch of sky/rapha team kit!

Tax dodge by their owners?

Could the owners of Rapha be saddling Rapha with debt/costs from their other businesses and avoiding paying tax on those other business’s profits?

I learned this from that well known school of business called ‘Goodfellas’

I’m not suggesting that Rapha will be actually torched, more figuratively.

How can you sell lycra jerseys for £185 and lose money?

Another quirk with Rapha (according to a Rapha shop worker and an email from Rapha), is their shops and online stores are not the same entity. Though this might be something to do with warranties and not having to share the same discounts between the two.

they aren’t loosing money, they are being creative with their returns so they are tax efficient.

like said above, if any can be bothered to look at their annual report I would expect a rather large sum being paid to investors servicing a business loan(s).  which wipes out any profit that would then have a tax liability.

IANA accountant….

Weird. I’d remembered the wiggo/cav thing as being in Rapha as well but here they are in Adidas:

I still have my signed WWF Sky Adidas kit from 2012. No idea where the Rapha came from 😉

I like their core shorts. Perhaps concentrating on doing one thing well and charging a modest premium is not such a bad business model. However, I don’t think I’ve bought much of their kit at full price. Ever.

Weird. I’d remembered the wiggo/cav thing as being in Rapha as well but here they are in Adidas:

Team Sky had a few different clothing suppliers/partners over the years.

Also the yellow jersey (and KOM, points etc) is a brand in itself, it’s not the normal clothing supplier to the team.

Accounts are here. 

EBITDA of a £1M on sales of £110M (interesting in of itself with cost of sales at £68M!) £7M in exceptional expenses and £12M in amortisation.

I’ll bet it continues to be loss-making for the foreseeable

Somewhat ironic that Rapha not being in the black given the colour of most of their clothing

Shows when you last looked then

Stop doing so many colours, minor variants, and edge case accessories (shoes, helmets

Would probably help

I walked past their shop in Soho on Monday, looked lovely but didn’t go in.

I own a rapha item and no nothing of them

I own a rapha item and no nothing of them

Or spelling (wink emoji)

A ‘decline and fall’ of Rapha would be an interesting lens through which to write a recent history of road cycling (or vice versa).

application-pdf

page 14 onwards is their accounts

To be fair to the Waltons, someone in the mix has got into cycling and is revamping the supermarket bikes into genuinely usable durable  rides. I hope they’ll follow this gravel bike up with an MTB and a city bike too. Maybe they’ll rebrand them from Ozark Trail to Rapha and every hipster in the county will want one.

$248 gravel bike anyone?

https://www.walmart.com/ip/Ozark-Trail-700C-G-1-Explorer-Gravel-Bike-Small-Frame-Green-Adult-Unisex/3405271473

How can you sell lycra jerseys for £185 and lose money?

The serious answer is you need to sell a lot to cover the fixed costs of running a business (staff, rates, distribution etc).

Then, given you need to differentiate your £185 jersey from everyone else’s expensive jerseys (LeCol, Cafe du Cyclist, La Passione, UC etc), you need to spend a lot on marketing.

Basically creating and maintaining a “brand”, is very expensive.

The other answer to that question is that on the face of it, they’re not. Before shelling out for ‘stuff’, they made just under a million in earnings

Rapha clothing isn’t what it used to be.  I’ve got 4 Classic jerseys from 2013-15 which are immaculate (and lovely) despite being worn many hundreds of times.  I’ve also got Classic jerseys (4) from 2021-23 which have been worn less than 50times, 3 of which are misshaped, bobbled and look rubbish.

All washed inside out  at 30deg with non-bio and a low spin speed.  I’m not sure I’d buy another.

Hasn’t it just been the worst year in living memory to be selling premium cycle clothing?

What even worse than the great chamois shortage of the early ’70s? Or those years in the 90s when the yellow spider mite devastated the lycra crop?

Must be bad.

Hasn’t it just been the worst year in living memory to be selling premium cycle clothing?

It’s certainly an industry that’s very weather dependent and the weather in the UK this year has been pretty abysmal.

On the other hand Rapha have stayed the course while many competitors have come and gone – they’ve still got a cachet that not many other brands can come close to.

It’s certainly an industry that’s very weather dependent and the weather in the UK this year has been pretty abysmal.

Plus the massive oversupply of product, with an abundance of crazy bargains in the Chiggle fire sale and other clear outs.

On the subject of wet weather, my Rapha waterproof jacket is amazing FWIW.

I wanted to join the Rapha team look, but unfortunately even then most ‘generous’ proportioned top made me look incredibly fat and I am not even that overweight. It was also something like £45 in the sale reduced from £75 for their basic top. It was a nice shade of purple, but I could see where else the quality was over any other £45 top. Almost felt like you were paying 1/3 Rapha tax.

However I have no doubt their top end stuff is very good.

To me it doesnt compute. Their sizing is all racing snake. Young skinny folk wont be able to afford their ridiculous prices, which leaves a very exclusive older ‘racing snake’ market, Not your avg IT Manager who can afford to pay their prices.

How can you sell lycra jerseys for £185 and lose money?

You mean a recycled bit of plastic?

Wiggo and Team Sky were in Adidas kit in 2012

To me it doesnt compute. Their sizing is all racing snake.

I think they know their market, they used to (I’m not sure they still do) have an offer that give you a 50% discount if you returned n item in exchange for a smaller size. Their marketing  is all about the  aspirational. A former GF who liked the idea of cycling wasn’t massively keen on mountain biking really, but when I showed her the world of road biking, and then when she stumbled across Rapha, she was totally hooked. I’ll bet she’s not alone.

Their sizing is all racing snake

not currently it isn’t.  Sure the pro road ranges are Italian fit, but the core, gravel and mtb stuff is true to size for the average person.  I have loads of it, tops, jackets, shorts and bibs, all size L.  I am late 50’s, 78kg, 5ft 9 and not in any way aero..