Blacks defends CVAs as suitors line up for group
Friday 29 October 2010
The chief executive of Blacks Leisure has launched a vigorous defence of the insolvency procedure that saved the outdoor retail specialist from collapse last year, as a smaller 27-store rival retailer Go Outdoors emerged as a bidder for the company.
The comments by Neil Gillis on company voluntary arrangements (CVA) – which last year enabled the operator of the Blacks and Millets brands to ditch 88 unprofitable stores – came as Blacks Leisure reduced its first-half losses.
Mr Gillis declined to comment on the emergence of Go Outdoors – which appointed John Lovering, the serial deal maker, as chairman in August – as a potential buyer. Last week, the group confirmed it had received initial takeover offers from "several parties".
But Mr Gillis defended the retailer's use of a CVA last November in the wake of the collapse of Speciality Retail Group, the company behind the Suits You chain, into administration on Wednesday, just eight months after its own CVA. Both processes were supervised by KPMG.
He said: "The reality is that you only do a CVA if the business is in serious difficulty. The reality was that we went into the recession as a loss-making business and we wanted to ensure we did not become another Woolworths."
Mr Gillis, who joined Blacks Leisure in November 2007, stressed that with the CVA, Blacks paid £7.3m to compensate landlords for the 88 stores that closed, as well as £2m for business rates on those premises. Blacks Leisure has completed a £19.5m fund raising this year to refurbish its estate of 98 Blacks and 208 Millets stores, as well as to open 12 new shops over the half year.
Mr Gillis said the new outlets had delivered strong sales and already account for 10 per cent of group turnover. The retail group is in discussions about disposing of its remaining 10 troubled boardwear stores.
For the 26 weeks to 28 August, Blacks Leisure reduced its first-half pre-tax loss to £8.5m from £15.2m last year, thanks to the restructuring measures.
The group's like-for-like sales on stores open at least one year tumbled by 6 per cent. In addition, Blacks Leisure suffered from a "significant stock overhang", as it had ordered for this year before the CVA. This caused it to "act quickly" to clear excess stock which in turn dragged down its gross margin by 5.6 percentage points to 47.9 per cent.
But Mr Gillis said that underlying sales had improved, and were now down by 3 per cent since half year, adding that consumers were still prepared to spend on outdoor gear. "A lot of our products are jackets priced above £200 and they are still shifting," he said.
This week, Go Outdoors reported a 350 per cent surge in pre-tax profits to £4.25m for the 53 weeks to 30 January 2010, on turnover of £75.4m. Under Mr Lovering, the former chairman of Debenhams, Go Outdoors is believed to want to acquire the whole of Blacks Leisure. It declined to comment yesterday. Lion Capital, the private equity firm that owns the parent of the Cotswold Outdoor chain, is another bidder.
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