Blacks Leisure, the leading British outdoor retailer, has enjoyed an upswing in the sales at its outdoor stores since the end of the summer. Encouragingly, given the current climate, comparable sales at the retailer’s outdoor stores were up by 4.5 percent in September and October, and there are signs that the stores’ new formats are performing strongly.
The situation could hardly be more different for the retailer’s boardwear business, which saw its comparable sales plunge by 26.6 percent for the same two months. Blacks Leisure therefore repeated that it was considering all options for the division. It has already entered talks with O’Neill to end its wholesale business with the brand before the expiration of the deal, stating that it was outside the company’s core retail expertise, it was absorbing large amounts of working capital and it was making losses.
As previously reported, the company’s sales for the 26 weeks ended August 30 fell by 9.4 percent to £133 million (€163.8m-$210.2m), a comparable sales decline of 7.7 percent. Sales of the outdoor stores decreased by 6.4 percent to £106.7 million (€131.4m-$168.6m), down by 5.2 percent in comparable terms. But the board sports division fared much worse, with a comparable sales drop of 16.1 percent for the half-year, ending at £26.8 million (€33m-$42.4m).
Furthermore, Blacks Leisure’s gross margin shrunk by 0.5 percentage points to 54 percent. Before a few exceptional items, the retailer’s operating loss reached £3.8 million (€4.7m-$6m), compared with a tiny profit of £0.2 million for the same period last year. After exceptional items of £2.2 million (€2.7m-$3.5m), attributed to store closures and restructuring costs, the operating loss stood at £6.1 million (€7.5m-$9.6m). The retailer ended the half year with a net loss of nearly £7.2 million (€8.9m-$11.4m), compared with a loss of £2.1 million (€2.6m-$3.3m) for the same period last year.
Yet again, this tally mixes widely diverging results between the retailer’s two divisions. The gross margin of the outdoor business firmed up and it returned a small profit, which turned into a small operating loss only due to exceptional charges. On the other hand, the gross margin of the boardwear business was badly hit by poor trading and clearance sales. It suffered a loss of £3.4 million (€4.2m-$5.4m), which was widened to an operating loss of £4.7 million (€5.8m-$7.4m) after exceptional charges and impairment of property.
However, the company has made swift progress with its restructuring and cost-cutting plans. It has reduced costs by £5.6 million (€6.9m-$8.9m), chiefly by reducing about one-third of the staff positions at its head office. Furthermore, the O’Neill business, formerly based in Washington, was moved to the group’s head office in Northampton, with a reduced level of overhead.
The company’s cash position was further improved after it obtained better payment terms from suppliers. Given the troubles that have beset some of their competitors, Blacks managers also felt compelled to add that they were working comfortably within their bank overdraft capacity, with a cash overdraft of £1.7 million (€2.1m-$2.7m) at the end of the period.
Perhaps even more interestingly for the longer term, there are signs that the new outdoor store formats launched by the retailer earlier this year are working. The five stores in which they were fitted reported a gross margin that was 10 percent higher than the rest of the chain. The formats will continue to be rolled out steadily but cautiously over the next months.