Blacks chief warns retailers are in recession

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The Independent Online

Blacks Leisure's chief executive said the UK retail sector is already in recession, as the outdoor fashion retailer posted flat underlying profits and sales.

Neil Gillis, the former chief executive of the health club chain Esporta, who joined Blacks Leisure in November, said: "I think we are [in a retail recession]. The consumer is being beaten up pretty heavily in terms of petrol, food and energy prices. I think they are being very careful in terms of the expenditure."

His comments came as Blacks Leisure – which trades through the Blacks, Millets, Freespirit and O'Neill brands – posted underlying pre-tax profits of £300,000 for the year to 1 March. However, the outdoor specialist posted a pre-tax loss of £9.3m, after £9.6m of exceptional items, including accounting errors and the closure of 45 stores.

In March, Blacks Leisure revealed accounting discrepancies of about £2m at its Sandcity subsidiary, which distributes and retails the O'Neill brand. For the 12 weeks to 24 May, group like-for-like sales fell by 4.1 per cent, although gross margin was up 350 basis points.

Mr Gillis said: "The business does need to be turned around. The business had had some serious issues in the past and we are embarking on a completely new strategy." It is targeting Blacks at the fashionable, high-quality, outdoor customers and Millets is focusing on heavy-duty experts. The group also revealed that Keith Fleming, Blacks Leis-ure's finance director and deputy chief executive, is leaving to take up a role with a private equity-backed business. He will be replaced as group finance director by Marc Lombardo, who joins from Greene King.

For the year to 1 March, its outdoor division, comprising Blacks and Millets, delivered an operating profit, excluding exceptional items, of £7.4m, which it attributed to progress on product availability and improved ranges. But its boardwear division, comprising Freespirit and Sandcity, posted a £3.2m loss, as customers stayed away from its stores.

Mr Gillis said it had no plans to sell its 44-store Freespirit chain. He said the Freespirit stores look "a bit tired" and vowed to refurbish all the Freespirit stores, but gave no time-frame.

Mr Gillis said Blacks' two new format stores in London had delivered strong sales results and a handful of further Blacks stores would follow in the autumn.

Dresdner Kleinwort analyst Sanjay Vidyarthi said: "Gillis has been very quick to come up with a plan and is delivering on it." However, he is forecasting flat like-for-like sales growth this year.

Blacks is halving its dividend to 1p a share.

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