'Organisational restructure' expected as Rapha reveals details of deepening losses

British cycling clothing brand Rapha is expected to undergo organizational restructuring and conduct formal consultations as the company anticipates increasing financial losses. In a press release on Wednesday, following CEO Fran Millar's resignation, Rapha disclosed a £7m drop in turnover from £96m in FY24 to £89m in FY25. The brand also reported a £5.6m increase in EBITDA loss for the year, from £2.6m to £5.6m.

Operating losses have risen to £21.2m, up from £17.2m the previous year, marking the ninth consecutive year of losses.

Rapha attributes these financial setbacks to deliberate investments in brand enhancement, product quality, cycling communities, and customer experiences, aiming to reduce dependency on discounts and promotions. Despite these losses, early indications suggest the company's strategy is effective, with encouraging revenue growth in key territories and Clubhouses, increased customer acquisition, and a return to growth in Rapha Cycling Club membership.

Rapha's new Clubhouse concept is also thriving, with Shanghai experiencing high footfall and Bentonville attracting 31% more new customers. The brand's customer lifetime value is rising, and its pinnacle performance range, Pro Team, is boosting sales. The financial strain primarily results from an amortization cost of around £10m annually.

Consequently, Rapha plans significant changes, including Millar's departure and a proposed organizational restructure, with a formal consultation process for affected team members. The brothers, Steuart and Tom Walton, Rapha's majority owners, affirm their commitment to the brand despite the challenges, emphasizing their long-term vision for the company.