Only COVID-19 to Blame?
Many fashion brands are bewailing their precarious futures as a result of the COVID-19 pandemic, blaming the virus for everything, from temporary store closures to lost footfall and sales, not to mention a spike in e-commerce retail. But possibly COVID-19 is only to blame in part. Many labels were in trouble before the outbreak. Here we take a look at two of these: All Saints and Boux Avenue.
All Saints
All Saints is a popular fashion retailer, both in the UK and overseas. For the year ending 2 February 2019 a turnover of £331 million, 48% of which was derived from operations abroad. Its operating profit was £3.6 million compared to a £6.2 million loss in 2018. Restructuring costs over the last 2 years were £5.4 million and staff numbers have been cut from 3,224 in 2018 to 3,044 in 2019.
The brand was purchased by Lion Capital in May 2010, the former owners of Jimmy Choo. From 2012 to 2019, All Saints had cumulative operating losses of £39 million. Typically, private equity firms such as Lion Capital load their investments with debt which result in large losses. As of 2 February 2019, All Saints’ debt was £240 million so when interest charges are added, the total losses before taxation soar to a massive £206 million for the brand.
We suspect the year ending 2 February 2020 however was not good as Lyndon Lea himself, the founder of Lion Capital, became a director in July 2019. Then on 13 June 2020, Sky News reported that the brand was to launch a Company Voluntary Arrangement (CVA). The CVA is an attempt for All Saints to limit store closures, staff cuts and to reduce its lease costs which came in at £44 million in 2019.
Boux Avenue
UK businessman, Theo Paphitis, bought the UK franchise of lingerie brand La Senza allegedly for £1 and two packets of cigarettes. In 2006, he sold the business for £100 million to Lion Capital. In 2011, Paphitis decided to dabble again in women’s underwear and launched lingerie chain Boux Avenue.
Boux Avenue has yet to see a profit and accumulative pre-tax losses from 2011 to 2019 stand at £76.4 million, in essence, this amounts to losses in every year. The 2019 losses alone were £26.6 million up from £11.7 million in 2018 on a turnover of £49.6 million. In February 2020, Paphitis appointed restructuring experts from Deloitte which no doubt will lead to store closures and staff redundancies.
The Future
Many fashion retailers were in a financially uncertain position before the days of COVID-19. The impact of the pandemic has further weakened these brands and they are likely to seek a major restructuring over the next few months.
