Gymshark profits take a hit as tariffs and investment weigh on growth

British athleisure brand Gymshark has reported a drop in profits for the financial year ending July 2024, as the company’s investments in new retail locations and the looming threat of tariffs in the United States squeeze its operations. Pre-tax profits fell from £13.1 million to £11.9 million, marking a rare setback in the company’s otherwise impressive 12-year streak of revenue growth.

Despite the profit decline, the business achieved a record-breaking £607.3 million in sales, a 14.1 per cent increase from the previous year, with the total number of units sold also climbing by 13.6 per cent. Gross profit margins showed an improvement, rising to 63 per cent compared to the previous year’s 60 per cent. Adjusted earnings before deductions rose by £6.4 million or 14 per cent, reaching £51.7 million.

The dip in profits has been attributed to both external pressures and Gymshark’s significant expansions. The company ramped up investments to open flagship stores in international hubs, including London, New York, Dubai, Amsterdam, and Manchester. These major investments have taken a toll on short-term profitability, with longer-term benefits yet to materialise.

Macroeconomic challenges have added to Gymshark’s difficulties. The company faces potentially higher costs due to proposed tariffs on imports from China and Vietnam, key sourcing markets for its products. The US government has already imposed tariffs of 145 per cent and 46 per cent on Chinese and Vietnamese imports respectively, though some measures have been temporarily paused. The stakes are high, as the US accounts for approximately 40 per cent of Gymshark’s total sales.

In the wake of these challenges, Gymshark has announced a restructuring initiative. Around 296 roles, representing nearly a third of its workforce, are at risk, while 168 new positions are expected to be created as part of the same restructuring process. Ben Francis, Gymshark’s co-founder and CEO, emphasised the need for the business to become a fully omnichannel operation and long-term brand leader, stating, “We must navigate these economic pressures while keeping focused on our goal of building a brand for the next 100 years.”

The company, which began in 2012 as a small business run from Francis’s bedroom in Solihull, has grown into a global leader in the fitness apparel market. In 2020, Gymshark achieved unicorn status with a valuation exceeding £1 billion following a major investment by US private equity firm General Atlantic, which acquired a 21 per cent stake in the company. Despite the current challenges, Gymshark remains committed to delivering high-quality products and continuing its mission to redefine fitness fashion.