Julia Reynolds, the new chief executive of Blacks Leisure, yesterday revealed a turnaround plan for the troubled outdoor retail group. But she appears to have a mountain to climb after it posted dire half-year results and issued a "going concern" warning.
The group behind the Blacks and Millets chains saw its losses more than double to £16m and said it needs to refinance its banking facilities before 3 March. Blacks also said it requires additional funding to turn around its performance and is considering an emergency rights issue.
Its chairman Peter Williams, who has now been appointed permanently, said: "We are looking at all options and that [cash call] would be one of them. We want to get it sorted out by February."
However, its requirement to restructure its finances led Blacks to warn that a "material uncertainty exists that may cast significant doubt about the group's ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business."
Blacks has been struggling for a number of years and narrowly avoided administration in late 2009 by implementing an insolvency procedure that enabled it to shed nearly 90 stores.
Asked about reports that Blacks could face administration if its performance does not improve, Mr Williams said: "That is not part of the plan."
However, its half-year results laid bare the depth of the challenge it faces. Over the 26 weeks to 27 August, Blacks' losses widened to £16m from £7m the year before, dragged down by falling sales and margins.
Freddie George, an analyst at Seymour Pierce, said the losses are "worse than expected". The group's gross margins – the difference between the price a retailer pays for a product and that which it sells it for – fell by 5.1 per cent to 43.7 per cent.
Mr George said: "New management now faces a severe challenge. Blacks Leisure is being impacted by the move for specialisation in the sports category and is being squeezed not only by the value players, including Sports Direct, which controls Karrimor and Field and Trek, but in addition the specialists such as Go Outdoors and Mountain Warehouse."
Since the end of August, Blacks said its trading performance had deteriorated and its sales had slumped by 14.2 per cent. This compares to the group's underlying sales falling by 7.2 per cent to £81.1m over the 26 weeks.
But Ms Reynolds, the former head of the online lingerie retailer Figleaves, has identified a "huge opportunity" to revive Blacks' fortunes, after conducting a comprehensive review of the business in her first 100 days.
She aims to strengthen Blacks' retail disciplines such as better buying, merchandising and stock management, and online offers. Ms Reynolds, who made her name as a fashion executive at Tesco, also wants to further develop the group's own-label ranges, particularly in Millets. This will help to improve its margins.
She said: "Some of the retail disciplines were missing in the business." For example, Ms Reynolds plans for Blacks to be able to change its stock four times a year by 2013, as opposed to just twice before she joined in August. Shares in Blacks closed down 0.4p, or 4 per cent, to 8.9p.
Speculation persists that Sports Direct, which owns 21 per cent of Blacks, may again try to acquire the group at a knockdown price. Ms Reynolds has invited Sports Direct for a meeting, but it has yet not responded.