Rapha's financial struggles continue, but there's a glimmer of hope amidst the losses.
For the eighth consecutive year, the iconic British cycling brand has posted financial losses, a concerning trend that has sparked debates within the industry. However, Rapha's CEO, Fran Millar, remains optimistic, assuring that there's no need for panic.
The company's financial results for 2024, presented to select media outlets, reveal an operating loss of £17.2 million, a slight improvement from the previous year's £21.2 million loss. These results cover the annual period ending January 2025, including the initial months of Millar's tenure as CEO, which began in September 2024.
During this period, Rapha's turnover took a hit, dropping from £110 million to £96 million. This decline was attributed to a "conscious decision" made by the company to reduce promotional sales and move away from the "discounting drug" that had become prevalent in the industry post-pandemic.
Rapha's accounts are held under Carpegna Ltd, the parent company formed when the brand was acquired in 2017 for £200 million. After assessing Rapha's current financial outlook, the directors decided to reduce the carrying value of the company, acknowledging that it had been set too high.
This reduction, explained Chief Financial Officer Michelle Woolaghan, doesn't impact the day-to-day operations of the business. It primarily affects the company's shareholders and owners, but Rapha's customers and stakeholders shouldn't feel any direct impact.
A significant portion of Rapha's annual losses stems from amortization, which accounts for around £10 million annually. Woolaghan clarified that this is an accounting adjustment, a result of the brand's acquisition in 2017. A large portion of the acquisition price was attributed to intangible assets, such as the brand's value, goodwill, and customer base. These assets need to be depreciated over time, similar to how a car or physical asset would be.
The directors prefer to use EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) as a measure of the company's health, given the impact of amortization on their financial statements. Rapha posted an EBITDA loss of £2.6 million in the year ending January 2025.
Despite the challenges, Woolaghan highlighted some positive aspects. Rapha's revenue, although declined since the pandemic, remains above pre-pandemic levels. The total active customer base and RCC (Rapha Cycling Club) membership have also surpassed pre-pandemic numbers, indicating an upward trajectory.
"We have some things to fix," Woolaghan acknowledged. In response to these financial results, Rapha's directors, as part of Millar's strategic plan, are targeting a return to profitability by implementing a new strategy.
Earlier this month, Rapha announced its decision to part ways with EF Pro Cycling's men's and women's teams after seven years. Millar emphasized that this decision was not financially motivated but rather a result of the brand feeling that the relationship had become stale.
Today, Rapha announced a new partnership, providing kit to the USA national team from 2026 until the end of 2029, including the Los Angeles Olympics in 2028. Millar expressed her vision for growth in the US market, drawing parallels to the impact of the London Games on cycling's popularity in the UK.
Millar, who has now completed her first year as CEO following founder Simon Mottram's departure, remains optimistic about Rapha's future. She believes the brand's potential is still incredibly strong, despite acknowledging the loss of market share.
"We have every intention of getting back to completely leading and dominating the market again over the next three years," she asserted.
In May, Rapha successfully completed a funding round, raising £15 million. The company is owned by brothers Steuart and Tom Walton, grandchildren of the billionaire founders of retail giant Walmart.
"We're in a unique position where our owners are willing to reinvest," Millar said. "There's a renewed confidence and sense of opportunity within Rapha. With the backing we have, we're in a league of our own when it comes to pursuing risky but high-reward opportunities, and our backers are fully supportive.
However, Millar cautioned, "Transformation takes time, and we aren't expecting immediate results."
So, what do you think? Is Rapha's optimism justified, or are these financial losses a cause for concern? Share your thoughts in the comments below!
