Bonmarché calls in administrators, "our model simply does not work," says CEO
The Bonmarché value fashion chain went into administration as the week ended, with tougher-than-ever trading conditions making a turnaround in its current form unlikely. The move puts nearly 2,900 jobs at risk although the 318 stores it runs will stay open while a buyer is sought.
The firm’s CEO Helen Connolly admitted that its business model in’t working in the current market conditions and that “the protracted economic uncertainty caused by the drawn-out Brexit process… has created negativities both in the global markets towards Britain and damaged consumer sentiment and retail footfall on the high street.”
The womenswear retailer, which targets the value-conscious 50+ shopper, has faced a “sustained period of challenging trading contains and cash flow pressure” that meant it couldn’t meet its financial obligations.
Joint administrator Tony Wright of FRP Advisory said he believes there will be interest in buying the business.
Connolly added: “Over the last 18 months, trading in our stores and market conditions on the high street have significantly worsened. This has overwhelmed the business and its financial position. The high street is going through a period of historic difficulty and we have been unable to weather the economic headwinds impacting the whole of the retail sector.”
It’s particularly significant that she said that after spending a number of months examining the business model and looking for alternatives, "we have been sadly forced to conclude that under the present terms of business, our model simply does not work. We have examined other options, including that of a CVA or refinancing, but do not believe these options will fundamentally change the core challenges facing the business. We are sadly no longer in a position to demonstrate to our shareholders that the business can continue as a going concern.”
Despite the turbulent times on the UK high street, the administration filing has come as a shock on one level as it’s only a few months ago that Bonmarché was taken over (for less than £6 million) by billionaire retail entrepreneur Philip Day.
The owner of Edinburgh Woollen Mill, Peacocks, Jaeger, Austin Reed, Jane Norman and other brands, has specialised in buying distressed businesses and turning them around and had acquired a controlling stake in Bonmarché in April via his investment vehicle Spectre Holdings. While Spectre’s offer for the remaining shares was seen as too low by some investors, he eventually acquired a more-than-95% stake and delisted the business from the London Stock Exchange.
At the time it was assumed that he would seek synergies with his Peacocks chain that’s a direct Bonmarché rival. But Spectre management signalled back in June that it was concerned about its acquisition’s ability to continue trading.
It had been spooked by ongoing weak trading and its open offer for the shares had a time limit put on it in late June. Bonmarché management, which had claimed the business was worth more than was being offered, sold their own shares in early July and at the time, Spectre repeated Bonmarché board comments “that the risks for the business going forward are heavily weighted towards the downside and that the current clothing market is not following the patterns of previous years.”
It added that it now believed “that the passage of time, and a further decline in the performance of Bonmarché, has eroded Spectre's ability to provide the advice, guidance and support needed to secure the long-term future of the business, its stores and employees.”
On Friday, Helen Connolly also said that “if we had had an opportunity to work with the Spectre team closely at an earlier stage, another outcome would have been possible.”
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