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Day's routes to rehabilitate Bonmarché

It was lining up to be the next retail victim to hit the headlines: a high street chain struggling to survive amid a series of profit warnings. That was until Bonmarché’s white knight arrived in the shape of retail tycoon Philip Day.

Philip day

The Edinburgh Woollen Mill Group (EWM) owner, whose empire includes Jaeger, Peacocks, Jane Norman and Austin Reed, snapped up a 52.4% stake in the value womenswear for around £3m on 2 April. The 11.4p per share he paid represented a discount of up to 30% on the previous day’s share price of 17.45p, and valued the entire business at £5.7m.

There is no doubt that Bonmarché has been struggling. In December, the value womenswear retailer issued a profit warning for the 2018/19 financial year, citing “extremely poor” Black Friday sales and ongoing Brexit uncertainty. It said at the time that it expected underlying profit before tax to be in the range of “break even” to a loss of £4m for the current financial year. It posted a second profit warning in March after total sales for the 13 weeks to 29 December fell 8.1% year on year.

Bonmarché now estimates that the underlying loss before tax for the year will be between £5m and £6m.

The fact that its previous owner, private equity firm Sun Capital Partners, was so keen to bid bon voyage to Bonmarché would normally ring alarm bells. So, what does Day see in this business?

Turnaround king

The entrepreneur has form in turning around struggling retailers. Day bought EWM in 2001 in a £69m takeover backed by the Royal Bank of Scotland. At the time the brand was floundering – but it now forms the centrepiece of his retail group.

In 2012 he bought Peacocks out of administration, and is credited with saving about half of the stores and 6,000 jobs. He is now in the process of rehabilitating Austin Reed and Jaeger, which he bought out of administration in 2016 and 2017 respectively. 

Cost cutting at Bonmarché, which has around 312 stores and concessions across the UK and 1,900 staff, will be a priority.

If Day succeeds in upping his share to 75% of the business, he can delist it, which will save up to £500,000 a year in the costs associated with being publicly traded alone.

Brand synergies

Bonmarche 1045079

A stock market announcement by Spectre Holdings, the investment vehicle Day used to purchase Bonmarché, stated that it would undertake a detailed review of its pricing and discount strategy; brand; stores; head office and distribution centre costs and efficiencies; head office functions; terms with suppliers; management board; funding requirements; and supply chain logistics.

“It is a business that has gone through quite a level of distress,” one retail agent commented.

Bonmarche 1045072

“Helen [Connolly, Bonmarché CEO] and her team did a good job getting the costs under control but [struggling sales] are not surprising considering there are four or five distressed retailers in the UK at the moment. [Day’s] big advantage is he can be pretty brutal in reducing costs. In many cases that doesn’t save a business, but it is a lifeline. Getting out of the negative news headlines alone can have an impact.

“He may well take financing in house, and he is good at using group synergies. He doesn’t have loads of buying teams and property teams – he drives benefits across the different areas of the group.”

Dan Simms, co-head of retail agency at property services firm Colliers International, noted the synergies: “Day has been accumulating brands similar to Bonmarché for a few years. He is looking to aggregate and put brands into larger units.

“Ultimately, [Bonmarché] could be housed alongside his other brands, otherwise why would he do those deals?”

‘Forever young’

Emily Gordon-Smith, director of consumer product at Stylus, believes Day can capitalise on the over-fifties market: “[Baby] boomers [born between 1946 and 1964] and over-55s [Bonmarché’s core target market] are one of the biggest opportunities – and wealthiest demographics – within fashion right now, and yet are hugely under-served across women’s and men’s wear.

“But this generation want something different to current offerings, which often focus on comfort and practicality. There’s a ‘forever young’ feeling among this cohort, and they still want clothing that looks fashionable, but is appropriate and wearable.”

Creating the right product for its target market has been highlighted as one of the challenges facing the retailer.

Bonmarche 1045080

Bonmarche 1045080

“I don’t think they really know who they are trying to hit [with the product],” said one supplier familiar with the business. “If you look at the models, they are in their late thirties or early forties – but who are they appealing to? The garments just aren’t nice, and neither are the prints.”

Another supplier agreed: “Bonmarché has definitely gone for a younger audience and that’s not its customer. It’s like Marks & Spencer aiming for the teen market. If you know your market, you should be the best in it, but that hasn’t happened.

“My mother is 80 and she shops in there. If there was a little animal print top that was cut a bit low, she’d say, ‘I’m not wearing that,’ but the person who may want it is never going to go in there.

“Shops get pigeon-holed and style is an important personal choice – it’s about the perception of you, which for many is not Bonmarché.”

Value proposition

The advantage for Day is that his group has extensive experience of working in the value market with Peacocks, so Bonmarché will have access to its suppliers, and buying and merchandising teams.

One change that Day may introduce is a drastic reduction in the number of products available. Reducing the SKU counts across the business should bring down the expense of logistics and merchandising, and streamline back-office functions. 

Drapers understands that Bonmarché and Peacocks have a large overlap in their store estates, which creates synergies. By combining deliveries with Peacocks, Day can effectively halve the number of trucks visiting per destination for deliveries. 

Another key improvement Day could introduce is to end the discounting that has become prevalent at Bonmarché.

One source familiar with the business said: “The first thing to do is get the right price policy. Companies seem to be on permanent Sale, and Bonmarché definitely falls within that category. As soon as they see footfall falling, the signs go up saying ‘Sale, Sale, Sale’.

“All you do is educate the customer that the price is only 40% of what it is on the shelf.” 

As consolidation on the high street continues, Day will need to administer some strong medicine in the form of cost-cutting and rationalisation to return Bonmarché to health. 

The Drapers Verdict

Bonmarché is a brand that seems to have forgotten what its brand USP is and who its target market is or should be.

The volume of products is an obvious area to cut down to size. If those problems can be fixed, then Philip Day may – at £3m for the controlling stake – have picked up a bargain.

The outcome of the review will be crucial as, long term, Bonmarché’s target demographic is expanding and has growing disposable income. But pulling off a turnaround in a very tough retail market is a big ask.



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