Blacks Leisure's chairman insisted yesterday that the troubled retailer could ride out grim Christmas trading after it warned annual profits would disappoint and that it needed more money to turn the business round.
The company said that falling consumer spending and confidence had hit trading since its interim results last month and said that its crucial Christmas trading period would miss expectations.
Peter Williams, the former Selfridges boss who joined Blacks as chairman in August, said the group was experiencing probably the worst retail environment he had ever seen.
"I've been through similar situations at other Christmases and normally what happens is, quite close to Christmas, people decide to have a good time and they start spending But the reality is you never recover what you have lost. It's an important trading period but it's not make or break," he said.
The group, which operates under the Blacks and Millets brands, said it needed extra funding to put its plans into place and that it would go to its shareholders first.
The company is also in talks with Bank of Scotland, part of Lloyds Banking Group, about refinancing its lending agreement ahead of the financial year-end in February. Mr Williams said he believed the bank would continue to support the company if it could raise some fresh finance to turn itself round. Blacks' already battered shares plunged on yesterday's news, dropping more than 60 per cent before closing down 11.4 per cent at a new end-of-day low of 3.88p.
The fall valued the retailer's equity at just £3.3m.
Mr Williams blamed unseasonably warm weather, falling disposable incomes and gloomy economic news for Blacks' poor sales.
Tour operator Thomas Cook also warned of dire trading earlier this week.
However, analysts at Charles Stanley said Blacks had been in long-term decline and there were questions over whether it could be revived. "We now see virtually no scope for the group's return to profitability," they said.
Mr Williams said shopping in Blacks' stores, and particularly in Millets, was "not a great shopping experience". Under its new chief executive, Julia Reynolds, Blacks wants to revamp the stores but it will need shareholders to put their hands in their pockets.
The company is 21 per cent owned by Sports Direct, which is controlled by Newcastle United's owner Mike Ashley. Blacks' relationship with Mr Ashley has been fraught and he refused to back a rights issue in May last year.
Mr Williams said Ms Reynolds met Mr Ashley last week and the meeting was "very constructive". Asked whether Mr Ashley was likely to stump up the necessary cash in an equity raising, Mr Williams said: "I would obviously hope so, but it's their decision."