SR Gent seeks refinancing as it closes retail stores

SR Gent, the Marks & Spencer clothing supplier, is in crisis talks with its bankers after the company announced it would be taking a pounds 14m provision to withdraw from its retail operations.

The Barnsley-based group is closing its eight Clothing Barn stores as a result of poor sales and margins to concentrate on its M&S business, which accounts for 90 per cent of its sales.

The news precipitated a 41 per cent collapse in SR Gent's shares to 35.5p. The company is now valued at just pounds 13m and is considered a takeover target unless refinancing can be arranged. The management - Peter Wolff, chairman, and Mike Stakol, chief executive - are likely to hand on as they own the majority of the shares.

The announcement forced SR Gent to delay publication of its results for the year to June, which had been due yesterday. The company said it did not know when those results would now be announced.

The disaster at Clothing Barn is the second time SR Gent has been forced to withdraw from high street retailing. In 1994 it took a pounds 7m provision to withdraw from the Susan Woolf fashion stores which pushed the group into a pounds 4m loss that year.

Clothing Barn was launched around the same time but this year the company found that "significant amounts" of finished garments and stocks earmarked for sale through the stores would not reach their book values. In addition, a large amount of fabric and accessories could not be sold or made up into finished garments for sale at prices that would cover their book value. The cost of this stock write-down together with the cost of the store closures have forced the pounds 14m exceptional charges.

The company said: "The estimated provisions have resulted in the need for the group to renegotiate certain aspects of its banking arrangements." The company said it would make a further announcement as soon as possible.

SR Gent makes ladieswear such as blouses, dresses and skirts for Marks & Spencer and has annual sales of around pounds 150m.

Shares in the company tumbled in June when it issued a profits warning. Management blamed the poor weather, which had hit demand for summer clothing. Fashion sales were particularly disappointing. The company also said that the weak South African economy had damaged sales and that it was looking to sell its Cape Town factory.

In the six months to 31 December, SR Gent recorded unchanged profits of pounds 2.8m. In the last full year to July 1995 it made profits of pounds 6.3m on sales of pounds 154m. The company's shares stood at 103p at one stage last year.