Radical changes for loss-making Blacks
May 30 2008 by Iain Laing, The Journal
BLACKS Leisure has promised radical changes to its business following another year of losses at the outdoor clothing and boardwear firm.
The group said its Blacks and Millets outdoor division achieved a near three-fold rise in operating profits, but this was offset by a poor year in boardwear, which trades through the Freespirit and O’Neill brands.
Blacks said overall losses for the year to March 1 were £9.3m, an improvement on the £13.8m reported a year ago. And while the company said it had taken the first steps towards improving its performance, chairman David Bernstein admitted that further radical change was needed.
Some steps have already been taken, including the reduction of Northampton head office costs and the introduction of more flexible working patterns to ensure in-store service levels can be boosted at busy times.
New managers with backgrounds in businesses such as Marks & Spencer and Gap have been recruited to improve retail standards, in particular through the use of better window displays to boost footfall in stores.
Blacks also vowed to refresh much of the current estate of stores, given that many sites had not seen significant change for a considerable period of time.
It has rationalised its supplier base and bought 15% fewer product lines for this winter as the company looks to remove duplication of products.
Blacks said: “Achieving the required turnaround of the business in the midst of a consumer recession will not be easy and the likelihood is that some aspects of the plan such as store roll-out will take time.
“However, the business has already delivered some important initiatives very rapidly.”
The company said it had made a solid start to the new financial year, with satisfactory trading in outdoor products but continued pressure on boardwear. Total sales in the 12 weeks to May 24 decreased by 5.2%, but this was offset by an improvement in margins following a period of heavy discounting a year earlier.
The latest figures compared with a drop of 0.4% in like-for-like sales for the year to March 1.
Profits before exceptional items in the period were £300,000, against £100,000 a year earlier, but the bottom-line figure was dragged into the red by onerous lease costs, write-downs and restructuring charges.
At an operating level, the outdoor brands delivered a profit of £7.4m, with the boardwear division posting a loss of £3.3m.
However, Altium Securities analyst David Stoddart said there were some encouraging signs from the retailer.
He added: “Blacks is carrying too much stock, some of which is aged.
“If management is able to reduce the over-stock, it will release funds to invest in the store revitalisation programme that has produced attractive early returns.
“Improved inventory management should also improve operating efficiencies along the supply chain.”
