Turnaround specialist Hilco Capital made the news in the UK shortly after the recession, when its rescue of entertainment brand HMV from administration led to one of the most pivotal high street recoveries ever witnessed in this country. Now it is hoping that a similar feat will be possible with fashion chain Bank, as one of its subsidiary businesses has acquired the retail brand from JD Sports this week.
In the year to the 1st of February, Bank recorded a loss after exceptionals and before tax of £8.1 million, indicating that the turnaround programme implemented by JD Sports had failed to truly take root.
JD Sports had been attempting to bring the brand back to profit since 2007, when it acquired Bank from private equity firm Phoenix Equity Partners for £18.5 million, but the recession and ensuing bout of consumer uncertainty made this extremely difficult and ultimately impossible for the sportswear and fashion group.
JD Sports executive chairman Peter Cowgill claims that the sale was a necessary part of company strategy to prioritise its sports division.
He says; “We have decided that we must prioritise future investment in the Sports fascias and consequently we believe that the sale of Bank is in the best interests of the group.
“We shall continue to support the broadest possible range of fashion brands within the group.”
Bank was JD Sports’ largest fashion brand, with 88 of the fashion division’s 147 stores operating under the retailer. These amounted to gross assets worth £51.7 million, but JD Sports claims that the necessary net assets writedown as a result of the sale will not be material to the Group net assets position.
Although the exact financial details of the sale to Hilco Capital’s subsidiary business were not disclosed, JD Sports insists that it “should result in a substantial recovery of its intercompany loan, the exact quantification of which will be confirmed by completion accounts in due course.” This is very good news for the group, as it is currently facing immense levels of competition from high street sportswear rival Sports Direct and will therefore benefit from having a more stable financial base from which to invest in growth.
According to JD Sports, all other businesses under the group umbrella have traded well during the second half of the year despite the ongoing difficult conditions on the high street.
In a statement, it said; “The remainder of the group’s businesses have continued to trade in line with our expectations during the second half of our financial year.
“Subject to a satisfactory performance against strong comparatives in the key Christmas trading period, the group remains well positioned.”
Hilco Capital’s extensive experience as a turnaround specialist certainly throws some positive light upon the tough situation Bank finds itself in at present. However, with the brand incurring heavy losses during the past few years, it may take more than an HMV-style reinvention to return Bank to the pre-recession profits it once enjoyed.
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