Blacks Leisure has been rocked by two of the UK's biggest credit insurance companies scaling back the cover they give to some of the outdoor fashion retailer's suppliers.
It is understood that two of the UK's biggest retail credit insurers, Euler Hermes and Atradius, have trimmed back the amount of cover for suppliers to supply goods to Blacks. The retailer trades through the Blacks, Millets, Freespirit and O'Neill brands.
The revelation is the latest sign that credit insurers are getting nervous about providing cover at previous levels to retail suppliers in all corners of the high street – and not just those in the beleaguered furniture retailing sector.
It is understood that Blacks is one of a number of small to mid-sized retailers which have had their suppliers' credit insurance trimmed recently, as the retail downturn and credit crunch bites.
The furniture retailer ScS suffered the far more serious problem of an insurer, thought to be Euler Hermes, actually withdrawing insurance cover from some suppliers this month.
Credit insurance cover is taken by suppliers to insure against a retailer not paying them for their stock.
A Blacks Leisure spokesman said: "A number of credit insurers are choosing to reduce their cover for a cross-section of suppliers to UK retail businesses, but this clearly reflects a wider market perspective.
"Blacks remains in sound financial health, with a £40m bank facility in place and an average net debt position of only £19m. We're very comfortable with our debt facilities and cash position." It is unclear if Atradius has merely scaled back its cover for a supplier to Blacks or whether it has temporarily removed all cover for a supplier.
An Atradius spokeswoman said: "In the case of Blacks Leisure dialogue continues."
A Euler Hermes spokesman declined to answer questions, but stressed it was still providing some insurance to suppliers to the retailer. He said: "We are on cover for Blacks Leisure."
An unnamed tent supplier is understood to be one of the suppliers affected by the scaling back of their insurance cover by the insurers. An industry source said: "Euler Hermes has been nervous for sometime about Blacks."
The revelation is a further unwelcome headache for Blacks Leisure's new chief executive, Neil Gillis, who has instigated a radical overhaul of the retailer's strategy since he joined from the health club chain Esporta back in November.
Blacks Leisure 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. The group was hit by the discovery of a £2m accounting black hole at its Sandcity subsidiary in March. Sandcity distributes and retails the O'Neill boardwear brand in the UK.
When it posted its full-year results in May, 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."
Mr Gillis has a strategy to cut its cost base by £3m, rationalise its product range and roll out a new store format. It is targeting Blacks at the fashionable, high-quality, outdoor customers and Millets is focusing on heavy-duty experts.
Euler Hermes stressed it is committed to the UK retail market. A spokesman for Euler Hermes, which has about a 35 per cent share of the UK non-food retail market, said: "We are not withdrawing from the UK retail market. We have billions of pounds of cover in UK retail and tens of thousands of suppliers to which we provide cover to trade with non-food retailers."Reuse content