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Rapha announces loss of £12 million, citing cost of living and supply chain concerns

The premium cycling clothing company has now posted a loss for the sixth year running, however an independent auditor identified no uncertainties which could cast a doubt on Rapha's future...

British premium cycling kit and accessories manufacturer Rapha has posted a pre-tax loss of £12 million for the year up to 29 January 2023, citing a downward trend in customer interest due to the cost of living crisis as well as overhead costs due to commitments made during the pandemic.

Documents filed at Companies House this week reveal that Carpegna Limited, the holding company of the north London-based business, suffered an annual comprehensive loss of £10.6 million after taxes, making it the sixth straight year that the brand was in the red.

However, an independent auditor said that they have not identified "material concerns" that could cast any "significant doubt" over Rapha's future, at least for the next twelve months from when the financial documents were issued.

In comparison, Rapha's pre-tax loss for the year 2022 was £10.5 million, and £7 million the year before that. Its turnover also dipped in 2023, going down from £131 million to £118 million.

> What the hell is going on in the bike industry? Wiggle Chain Reaction turmoil discussed plus pro cycling's idiot problem on the road.cc Podcast

2023 Rapha Men's Brevet Insulated Gilet - tail.jpg

In a statement shared with road.cc, Rapha’s CEO Francois Concervey said: "Our financial results highlight the impact of a turbulent few years and the ongoing challenges faced by the business, and the cycling industry as a whole. Despite a negative profit year, through strategic decision making around reducing overhead costs, leadership changes and doubling down on our mission to 'inspire the world to live life by bike’, I’m confident in our ability to navigate the current economic climate and make the right decisions to see improved performance.

"During the recent period, Rapha witnessed a return of customer demand levels closer to the long-term average growth trend. This followed two exceptional periods driven by the COVID-19 pandemic and subsequent lockdowns, which significantly boosted the demand for sporting goods, including cycling apparel.

"However, concerns over the cost of living have started to impact consumer confidence in certain markets. Additionally, the market has become more competitive as competitors, both direct and indirect, strive to normalise their supply chains after the disruptions caused by the pandemic.

"Despite the challenges faced, Rapha has undoubtedly emerged stronger, retaining many customers who initially joined during the pandemic while also acquiring new ones. The company's revenue growth and customer base have remained resilient, holding up well against the record levels achieved during the height of the pandemic."

> Rapha undergoes refinancing operation to write off debt but says it “far outperformed” rivals in 2022

After the Covid-19 pandemic and then the cost of living crisis, Rapha's director Sean Clarke said that "revenue levels and customer acquisition have held up well". However, its earning were adversely affected due to commitments to overheads costs made during the pandemic.

Earlier this year, we reported that Rapha underwent a refinancing through a debt-for-equity, aimed at reducing its cost of borrowing. CEO Convercey, previously Rapha’s chief brand and marketing office, however had told road.cc that despite the total revenue being marginally down versus the previous year, it had "far outperformed" the industry trends in the past year.

Following the cycling boom experienced by the cycling industry during lockdown, the post-pandemic period has been marked by tough times all across the board, with even cycling giants like Shimano and Halfords struggling.

Most recently, it was Wiggle Chain Reaction, the online retailer which has been a staple for many British cyclists' shopping bug became the latest company to bite the bullet as it entered adminstration.

It was soon announced that its parent company Signa Sports United had filed for insolvency at all courts in germany, and now Wiggle has been put up for sale by the administrators. Just this week, 105 members of its staff were laid off, with rumours of interest from several parties, including Mike Ashley's Fraser Group.

Adwitiya joined road.cc in 2023 as a news writer after graduating with a masters in journalism from Cardiff University. His dissertation focused on active travel, which soon threw him into the deep end of covering everything related to the two-wheeled tool, and now cycling is as big a part of his life as guitars and football. He has previously covered local and national politics for Voice Wales, and also likes to writes about science, tech and the environment, if he can find the time. Living right next to the Taff trail in the Welsh capital, you can find him trying to tackle the brutal climbs in the valleys.

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40 comments

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cycleofaddiction | 8 months ago
0 likes

I think their losses would be even more without their obvious strategy of increased pricing and reduced manufacturing costs by dumbing down products, removing features, inferior materials and far east manufacture! I have been a Rapha customer from the early days and have come to this conclusion! Also like everywhere nowadays, replacing customer service with AI, which just leaves you feeling that the company from a customer perspective is just on a downwards trajectory!

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Keith57 | 8 months ago
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The Festive 500 Rapha sponsored for a long time was quite nice, especially the embroidered 'roundel' which ended up rectangular. I have 10 of these 😎. I have 2 of their cotton hats and a gillet, but not much else. So well done Rapha for that.

Rapha never competed with Assos quality or design for me. That's what I mostly ride in. But even Assos has gone a bit strange. New bib shorts every few months, hard to understand the complicated range and naming convention.

It used to be quite simple. The owner / manangers used to take years to design a new item and then it would be in production for a long time. Simple to work out where an item fitted in the range for temperature/ season, etc. 

Now, if you dont check out the website for a while, when you revisit everything has changed. Far too confusing for me. I think they are now owned by some American holding company so their priorities are different I guess?

The Assos kit I have, from a few years ago, mostly, never seems to wear out either!!

I do like 'Cafe du Cyclist' stuff. Thie summer tops are always 'interesting' to look at and ride in.

Very few companies today have any kind of 'Provenance'. In the climbing-world, which I'm a bit more familiar with, Patagonia is almost the only one left (there are some others) owned and run by the original founder, Yvon Chouinard, a proper hero, for me!

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Larry T | 8 months ago
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I wondered when this thing began how well things would go for a company that seemed like a "Let's sell cycling clothing! We have zero history or heritage of a brand like ASSOS so we'll just make it all up!" brain-fart. But somehow there were enough folks fooled into buying the stuff for the founders to sell the thing to some dolts who were blowing their grandparent's fortune a few years later. But the jig is up now...finally? I find some justice in this  1

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Robbiedondo | 8 months ago
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Not related to their product, but I crewed an event once with them and none of the staff talked to anybody, they were aloof and didn't strike me at all like 'real' cylcling people, just an bunch of hipsters 

I've no trouble spending money on items but I need to at least feel like there is affininity between me and the brand and with Rapha I just don't feel it

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kwalls | 8 months ago
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I find the Rapha seldom have stuff in stock, dammit.
Without any stock to sell, how on earth are they ever going to make a profit? 😳

They really do need to get their supply chain together, and while they're at it, their fulfilment also stinks.

And that's coming from me,  a Rapha fan boy... 

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marmotte27 | 8 months ago
2 likes

So investment funds are fucking up cycling? Explains a lot...

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brooksby replied to marmotte27 | 8 months ago
5 likes

marmotte27 wrote:

So investment funds are fucking up cycling? Explains a lot...

I think that the activities of investment funds are f-ing up a lot more than just cycling... 

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espressodan | 8 months ago
8 likes

All of these luxury brands just drive a hugely cost-intensive marketing machine that makes their clothing, wheels, lubes, watches, shoes, bikes etc massively expensive.

They use the expense to sell the Veblen good. They need to sell a Veblen good to pay for the marketing to make you want the Veblen good. It's a vicious cycle.

And the big problem is that brands like Rapha have priced themselves like the Veblen good, especially with regard to their margins, but they're not actually a Veblen good. Nobody is paying more for a used Rapha jersey next year than they did for a new Rapha Jersey this year. Ultimately it's all been driven by the 2008 cheap money train that made enough people feel rich for the past 15 years to let the brands get us and them to where we are and it's just not sustainable when the retraction come.

Team sponsorships, bricks and mortar stores, flashy websites, race sponsorships, social media influencers, website ads, paid reviews, podcasts, Google, they don't come for free. And that's the problem, they're not actually trying to convince you to buy clothes, they're trying to convince you to buy into a brand and attach yourself to it. Humans have strong tribal instincts and Rapha want you to decide that Rapha clothing is your tribal signal.

I would love to know what percentage of the price of any piece of Rapha clothing goes into manufacturing and what percentage goes into marketing. At the end of the day, it's just technical fabric that's sewn together and I believe most of it is made in China. For every jersey they sell, they've paid vastly more to sell you that jersey then they've paid to make you that jersey. That's the same for many discretionary products these days, but I'd bet Rapha's cost delta is way up there, because they need to convince you to pay $250 for a jersey and most other brands aren't busy paying for clubhouses in city centres. I'd bet it's up there with Rolex, and Rolex at least have some pretty high manufacturing costs because their goods aren't just mass-produced in China but I'd wager that the delta between a $17,000 Sub-Mariner vs it's production cost and a $250 jersey vs it's production cost is pretty similar. That's so Rolex can sponsor F1 and Wimbledon. You're not paying for the watch, you're paying for the kudos.

The problem is, that cycle can't just stop, because without it Rapha is literally nothing. Without a brand it's just expensive cycle clothing or cheap cycling clothing. If Rapha decided that they aren't selling enough clothes to feed their marketing beast any more then they're stuffed, because a $60 Rapha jersey isn't a Rapha Jersey, because for all their talk about 'Riding a bike is one of life’s simple pleasures', Rapha's whole brand image confirms that they don't actually believe that. You don't sell jerseys basically starting at $250, and a 'budget' range that starts at $120 if you genuinely believe in 'inspiring and equipping people to live a life by bike, all day, every day'. I mean, you might believe it, but you're strongly signalling that you don't actually give a stuff about that. What Rapha are selling is an aesthetic for those that can afford it. At least AbsoluteBlack try to make up some absurd but vaguely credible sounding pitch about the aerodynamics of their derailleur cover, physics defying lubicant or the heat dissipating brake-block-barbeque grill that they try to get us to buy.

So if people aren't spending on Cycling at the moment (which we all know they aren't) then Rapha has three choices, cut costs, increase turnover or close down.

Some of that might be a problem for the sport too. Because those Rapha marketing dollars all trickle down somewhere.

You can lay people off, but there are only so many people that you can lay off and companies do need people to design things, run the books and sell things.

Given that their costs are so heavily attached to their brand, they can't increase turnover by spending more on marketing, because their market (those that can afford their products) is changing. Rapha clubhouses etc have pretty fixed costs and given their city centre locations, you still need to sell a lot of cycling jersey's, even at $250, to pay the rent. Assuming they stay in cycling, literally any other market means that they need to reduce their prices to reach their customers, which I would guess might make Simon Mottram have a stroke give the entire utterly wanky nature of the company he built, and 'cheapo' Rapha isn't Rapha.

At least until they file for administration, Mike Ashley buys the name, and they Sports Direct start selling Rapha cycling clothes beside the Muddyfox cycling shoes.

I buy my jersey's from AliExpress. I don't buy fakes, just Chinese brands selling to Western markets. They're $25. They quality of some is exceptional. Rapha jersey's are also made in China.

I would pay more if I thought that it benefitted the sport, I get that races and teams need sponsorship, but I'm not paying $120 to $420(!!!) for a cycling jersey.

If cycling could sort out it's whole funding and sales model I'd probably happily go full 'Footy and buy a few team jerseys (well, maybe T-shirts) if money went back into the sport. Because how ridiculous is a sport where wearing a team jersey is seen as a basic mistake of etiquette and we all go out and pay to associate ourselves with a sport in a way that has the least possible impact on the success of whatever team or rider we might like the most!

Weirdly long Rapha rant I know. It's not schadenfreude, but they really tick me off and they're just one illustration of what a lot of the rest of the consumer side of the sport is doing. Taking sponsorship money out of cycling is bad for the sport, but I also think that luxurification of brands in cycling have been bad for the sport, and the fact that many think they're selling a luxury good when they're all replacable is going to lead to big problems very soon, but maybe just for the private equity funds that have been silly enough to buy them because they were always the target market, both as customers and, it turns out, as owners.

I don't think we'll see AliExpress fashion for all, because it't not particularly exciting and warranties and jobs and sponsorship is all important, but I pray that we see a return to the middle market very soon with normal mark-ups reflecting a cost of sales withiout needing to feed a ridiculous marketing and luxury arms-race, because I don't think that there really is a midde market in much of cycling any more.

Let's face it, over the past 15 years you can't exactly say that sports cycling is an accessible sport any more, and most of that is driven by the hugely expensive brands, from the bikes to the wheels to the clothes to the nutrition selling gear that, while it isn't necessarily 'cheap' has prices significantly inflated my a massive marketing arms race in the sport that has just put the whole thing out of reach of most people and, I think, colours many people's perceptions of the sport very negatively.

 

 

 

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Car Delenda Est replied to espressodan | 8 months ago
3 likes

Agree with all your points but I don't think 'luxury fitness' is a problem exclusive to cycling.

We have an economy built around sedentary jobs so the only way of staying fit is with recreational exercise, this creates an incentive to display sports gear to signal that we take fitness seriously. This in turn leads to people wearing fitness gear without doing fitness activities and so the only way to signal that you are a truly fit sportsman is with expensive luxury brands.

So without the luxury gear to wear is there really any point in cycling?

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philhubbard replied to espressodan | 8 months ago
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Agree with parts and not all of your statements, unfortunately the way cycling is now is precarious and we need these brands to actually create a professional sport rather than just a hobby. 
 

I also believe (not justifying) that most of Raphas garments are made in the EU (Romania or Czech Republic) with their accessories and non-bike garments being from the far East 

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mark1a replied to philhubbard | 8 months ago
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philhubbard wrote:

I also believe (not justifying) that most of Raphas garments are made in the EU (Romania or Czech Republic) with their accessories and non-bike garments being from the far East 

It must be both, three of my jerseys are from Rapha, one was made in Romania (Laka Insurance promo freebie), the other two were made in Vietnam (L39ion of LA training jersey and Etape Caledonia 2021 event jersey). No discernible difference between them in quality IMO. 

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zeeridesbikes replied to espressodan | 8 months ago
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Rolex is a bit of an outlier as they have increased their exclusivity by not stocking watches and putting potential buyers on an imaginary list.

A no date submariner retails at just under £8k (not £17k) but is hard to get so can be flipped at a much higher price if you are able to get one at retail. So unlike expensive clothing they appreciate in value. 

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rivitman replied to espressodan | 8 months ago
2 likes

The Walton brothers (Walmart) bought Rapha 6 years ago for a reputed £200m, by which time the job was done. I believe all original investors departed with a big grin on their faces leaving Simon Mottram onboard for a limited period involving mirrors and smoke. He's out now.

Were Walmart ever going to understand where their money went? Probably not, but I think Rapha's golden galleon had long sailed off by then. We have a lot to thank them for, least of all shifting the perspective of cycling clothing forever and popularising the sport with Wiggins and the Sky team.

That was then. Much of what you write now I agree with, but the landscape has changed over the past 15 years. I for one am grateful to Mottram and his vision for kicking it off in the first place.

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recurs | 8 months ago
1 like

I wear lots of Rapha stuff, but mostly because I have a Rapha shop nearby. At the Rapha store I can find lots of options to try on in my size, unlike the limited stock at bike shops. If you're patient, you can always get the stuff on some sort of deal or sale. 

That said, like others, I really don't get the numbers game here. How are they still in business if they've been in the red that long? Why do they still have run expensive physical locations (has anyone been to their very, very sleepy shop in the expensive Miami design district?) when they could just sell online? There must be a deeper angle on this that isn't public domain.

This is disappointing for me. Rapha do offer gear in a good range or riding needs and styles, and with an amount of attention that most cycling kit companies don't or can't offer.

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Sredlums | 8 months ago
3 likes

So it turns out there are fewer dentists than they anticipated.

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Rik Mayals unde... | 8 months ago
2 likes

My nephew bought a few Rapha items. He said the quality was shit and they were bloody expensive shit, I think everything he had fell to pieces.

 

I'll stick to my Assos, bombproof. I have only thrown one Assos item away, a pair of bibtights which were over 25 years old and had literally worn away so much they were falling to pieces. I wonder how many 25 year old Rapha items will still be in use?

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jimc101 replied to Rik Mayals underpants | 8 months ago
4 likes

Too many people keep Assos shorts and tights for too long and never look at how thin they get at the back, enough so if following someone you can get far more of an eyeful than you ever wanted

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peakingintwomonths | 8 months ago
7 likes

Interesting positive spin:

Rapha’s CEO Francois Concervey said: "Despite a negative profit ......."

That would be  "..loss...."

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Surreyrider replied to peakingintwomonths | 8 months ago
0 likes

I wonder when they last had a positive profit...

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Freddy56 | 8 months ago
1 like

It is not a business, business' make money. It is a vanity project for the people who wear the kit and the owners. To correct the editorial, Rapha has NEVER turned a profit.

Blaming anything else other then the directors for the continual losses is just shameful. We are as much surprised at the losses this year as last year...and the year before.

Simon Motram said recentlyon a podcast "there are too many cycling apparel brands" he pompously said on high... And that was me for the brand. After ten years I'm done- the Vietnam made shorts were the last straw.

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LookMumNoHands | 8 months ago
5 likes

That's pretty impressive given the cheap and shonky Vietnamese made stuff they're punting out for premium dollar. I will occasionally buy casual/urban/off bike stuff in the fairly frequent sales. There's the odd highlight, much of it is mediocre at best, and certainly nothing worth the RRP. The cut and sizing tends to be all over the place.

Rapha seem to spend a lot of time fannying about being A Brand and doing Brand things that make them seem cool, but aren't directly about them making clothes. My employer does the same thing, and it's a tremendous way to plough through a lot of money and distract a lot of people from the day job.

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Rik Mayals unde... replied to LookMumNoHands | 8 months ago
1 like

Rapha seem to be a hip, woke company supplying shite clothing to hip wokes.

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RDaneel replied to Rik Mayals underpants | 8 months ago
4 likes

Biker Phil wrote:

Rapha seem to be a ....company supplying...clothing....

My father is a fish.

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grOg replied to RDaneel | 8 months ago
0 likes

Thought there was something off about your eyes.

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Wingguy replied to Rik Mayals underpants | 8 months ago
9 likes

Biker Phil wrote:

Rapha seem to be a hip, woke company supplying shite clothing to hip wokes.

Are you aware that the word 'woke' doesn't actually mean 'anything I don't like'?

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hawkinspeter replied to Rik Mayals underpants | 8 months ago
10 likes

Biker Phil wrote:

Rapha seem to be a hip, woke company supplying shite clothing to hip wokes.

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Simon E replied to Rik Mayals underpants | 8 months ago
4 likes

Biker Phil wrote:

Rapha seem to be a hip, woke company supplying shite clothing to hip wokes.

Does that make you just an anti-woke reactionary gobshite gammon?

Conveniently ignoring how much Rapha has put back into the sport over a long time while many others... not so much. If Rapha hadn't put so much effort into being a distinctive brand (some call it innovating, reaching new markets, others call it "fannying around") then they would have disappeared yonks ago.

I don't own any Rapha and wouldn't rush to judge the quality of their products or whether their bricks-and-mortar sites work based on a few anecdotes. But some people love to take the opportunity to kick a brand, even when it isn't down.

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zeeridesbikes replied to Rik Mayals underpants | 8 months ago
3 likes

Because they have brown people on the website? Let's take back control of cycling. 

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Sredlums replied to Rik Mayals underpants | 8 months ago
2 likes

TL;DR: "Boohoo woke boohoo".

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davecochrane replied to Rik Mayals underpants | 8 months ago
2 likes

The second anyone employs "woke" as a pejorative, I'm glad...because it saves me the bother of waiting to find out if they're stupid. 

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