Blacks fights for survival as losses rise
Published 29/10/2009 | 15:51
Struggling outdoor chain Blacks Leisure, owner of Millets, today said first-half losses had almost trebled amid talks over a survival plan for the business.
The firm has announced plans to close 89 loss-making stores and called in administrators to its O'Neill boardwear outlets after warning it would breach banking covenants last month.
The beleaguered company is in discussions over a restructuring plan presented to Lloyds Banking Group ahead of tomorrow's deadline set by the bank.
Blacks made pre-tax losses of £18.1m in the 26 weeks to August 26, up from £6.7m previously, as its boardwear division and underperforming Blacks and Millets stores dragged the group down.
Chief executive Neil Gillis said: “In the current economic environment it is clear that more radical restructuring measures are needed to free the core outdoor business from the burden of the loss-making boardwear business and a tail of stores that have not traded profitably for many years.”
Blacks' shares fell around 10% today as the group admitted “material uncertainty” over the future of the business if the rescue plan is not agreed or if trading does not come up to scratch following an agreement.
Like-for-like sales over the period were down by 1.1% but margins were squeezed by the promotions needed to drive sales in a bleak high street climate as well as a stronger US dollar.
The group is hopeful the action taken will “ultimately strengthen” the business but warned that the full-year outcome was heavily dependent on restructuring talks and Christmas trading.
Following the restructuring, the group will have 206 Millets stores and 89 Blacks outlets as well as 14 Freespirit stores.
It has also cut 50 jobs from its Northampton head office.
There are currently five Millet stores in Northern Ireland in Newry, Enniskillen, Belfast, Newtownabbey and Ballymena.
Blacks refused to comment on a report in the Times today that it may use a Company Voluntary Agreement (CVA) — where landlords make financial concessions to support struggling tenants — to rid itself of the loss-making stores.
Altium analyst David Stoddart said: “We clearly take the view that... both landlords and bankers would prefer to avoid the ‘nuclear option' of administration.
“That being so, a profitable business should soon emerge.”