Secretlab’s profit declines in FY 2022 as revenue grows

Secretlab, a Singapore-based maker of gaming chairs, reported slowing revenue growth for its financial year ending February 2022, its latest available statements show.

FY 2022 saw an 18% year-on-year growth in earnings while total expenses were up 39% over the same period. As a result, its profit before tax plunged by 58%.

Not as profitable as people think

A key driving factor behind the higher costs in FY 2022 was the cost of sales. This rose 42% between FY 2021 and FY 2022, sending gross profit margins down from 39% to 26%.

“Our chairs actually cost a lot to manufacture – we don’t make as much profit per sale as people think,” explains Ian Ang, Secretlab’s co-founder and CEO.

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The company “historically made around 17% profit per chair after all the associated costs such as R&D, product development, manufacturing, and operating costs, using only premium-grade materials,” Ang tells Tech in Asia.

However, Secretlab’s profits per chair for FY 2022 and most of calendar year 2022 “neared zero” due to freight costs surging by more than 600%. Prices of aluminum and steel also jumped by over 60%.

Ang adds that these prices “have since normalized in the past 18 months.”

Meanwhile, administrative expenses – the big cost bucket after cost of sales – went up 20% year on year.

Inventory build-up

In the most recent financial year, Secretlab saw its inventory grow by 418% to US$157 million – an acceleration from the 243% growth between FY 2020 and FY 2021.

As sales in 2020 tripled, Ang says the firm “had to increase inventory moving forward.”

Negative cash flow from operations

Better days ahead, but not before losses