Thorn to axe 360 at rentals division
Tuesday 25 February 1997
In America it is introducing several promotional schemes designed to improves sales and encourage customer loyalty.
The action came as speculation mounted in the City regarding possible management changes at Thorn following the company's disappointing performance. The shares have halved since the demerger and were hit hard by a profits warning last month.
Michael Metcalf, the chief executive, was not available for comment yesterday but some analysts said changes were likely. One analyst said: "Given what has happened, it would hardly be surprising if heads were to roll." The company said it had received no pressure from investors for a boardroom shake-up.
Thorn said the UK store closures would involve a pounds 10m charge against this year's profits but would then yield savings of pounds 6m a year. The stores ear-marked for closure are the smaller, underperforming branches that are in poor retail locations. The 90 stores account for 15 per cent of all Radio Rentals outlets but generate 7 per cent of sales. "The stores were only operating at half-efficiency," Thorn said.
The City responded positively to the changes, marking Thorn shares nearly 10 per cent higher to 203p.
Though analysts predict further store closures at Radio Rentals, Thorn plans to continue to roll out its Crazy George's format and should have about 60 stores in operation by the end of the year.
In the US, Thorn is to woo rental customers with a series of promotions that offer rewards for loyalty. Under one of the offers, called "6/50", customers who remain loyal for more than six months on a rental contract receive a 50 per cent discount for the remainder of the agreement.
"We have a high churn rate in the US and we are hoping to increase customer numbers and lock them in," said Thorn's spokesman Jim Donovan.
The company is also improving the support structure in the US by merging the field sales teams of two divisions, Rent-a-Centre and Remco.
The changes were announced alongside Thorn's third-quarter profits figures which showed an 8 per cent increase in pre-tax profits to pounds 123m for the nine months to 31 December. It said fourth-quarter performance would be affected by the third-quarter trading figures, and the strength of sterling.
Investment column, page 18
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