Blacks reports half year losses
4 Nov 2008

Blacks Leisure has reported first half losses for the period to 30th August of £6.7m, compared with £3m for the same period last year.

Group sales in the first half decreased by 9.4% to £133.0m (2007: £146.8m). Like for like retail sales decreased by 7.7% (2007: increase of 3.0%).

However the group says its turnaround plan is on target with cost reductions of more than £5m this year, thanks in part to staff reductions of almost one third.

A gross margin of 54% was achieved in the period (2007: 54.5%). The underlying margin was stronger than last year, especially in Outdoor, but was adversely affected by the poor trading performance from the Boardwear business where a greater level of discounts had to be applied to the end of season sale to clear stock.

Trading during September and October was positive with sales up 4.5% in the outdoor category.

David Bernstein, Chairman, said:

"During the first half the Group made good progress with the initial phase of its turnaround plan. The Outdoor business delivered an encouraging performance against challenging comparatives and we are pleased with the performance of the new Outdoor store formats, which will now be rolled-out steadily across the estate. Boardwear continues to be a very difficult market and we are examining all options for this business.

We are encouraged by this better start to the second half and our plans for restoring sales growth to the business will be the key focus for the remainder of the current year and into 2009. The outlook for the remainder of the year will be influenced by trading over the important Christmas period and possibly, wider economic factors."

Chief Executive, Neil Gillis provided an operating overview:

We have made significant progress with retail standards having focussed our attention on the merchandising and window displays of the stores. Although we are perceived as a specialist retailer, much of our product range - from jackets to wellington boots - is mainstream and has mass market appeal. By utilising our window space more effectively and promoting these items in an imaginative and eye-catching manner we have been able to reach a much wider group of customers than in the past.

We have developed two new formats for our Blacks and Millets brands. These formats have been tested at sites in Kensington and Holborn in London, Haverfordwest in Wales and in two sites in Newcastle. The results of these tests have been impressive with gross profit at these five stores now running at +10% ahead of the total chain. We have further sites identified for the next phase and we will continue to roll these formats out at a steady, measured and sustainable pace.

Finally, we took the decision early this year to reduce our cost base. This has given us an advantage over many other retail businesses which are only now beginning to tackle this issue. Between February and April we removed almost a third of the total number of head office roles and introduced a labour scheduling system for our stores to increase flexibility, improve service and reduce costs by £5.6m.

We are currently reviewing our options for the Boardwear business. We continue to assess the correct size and shape for the business going forward and we have entered into negotiations with O'Neill Europe to terminate our wholesale distribution contract early. This business is outside of our core retail expertise, it absorbs a large amount of working capital and it is loss-making.

As we go into our critical second half we are confident that the turnaround plan is beginning to deliver and we have seen encouraging results so far in September and October. However, we are mindful of the fact that this turnaround is being undertaken in the midst of a consumer recession and so we will need to continually examine opportunities to drive the business even harder.

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