East management has blamed an “inconsistent” approach to design for its worsening financial position in the build-up to its pre-pack administration in June.
A creditors report issued by administrators Duff & Phelps and filed at Companies House last weekend shows the womenswear chain’s turnover fell 4.2% to £38m for the year to March 28, compared to the year before. Operating losses widened to £3.2m from £712,300.
It had already accumulated losses of £2.9m in the financial years between April 2012 and 2014.
On June 22, a group called East Lifestyle bought certain parts of the business in a pre-pack deal. At the time the amount was undisclosed, but the creditors report reveals it was worth £3.4m.
East Lifestyle’s sole shareholder is Fabindia, which has been a majority owner of East since 2012. The directors of East Lifestyle are former chief executive Suzi Spink, product director Penny Oliver, Fabindia board member Sunil Chainani and Fabindia managing director William Bissell.
Prior to the pre-pack deal, East had 61 stores and 44 concessions located in the UK and Ireland, as well as an online business, with a warehouse and head office in Wandsworth, south London. In June the business announced it would close 19 stores and five concessions.
The creditors report shows the amount owed to non-preferential unsecured trade creditors, which includes suppliers, amounted to £1.3m.
According to the report, East’s management conceded that several changes in the design team resulted in products that “diverged from the traditional ranges”.
They also blamed its worsening financial performance on a general trend towards spending in different channels, which put pressure on the profitability of high street stores, and a lack of flexibility in the store portfolio due to historical rent agreements.
One East supplier told Drapers: “The business had been in trouble for a while and had a lot of stock built up; I’m surprised that no-one saw it earlier.
“They brought in new product to appeal to new customers but they bought too heavily into it, so I think they alienated their existing customers.
“The product was good but they brought it in without marketing it properly and they didn’t give it long enough – they could have trialled it in some stores rather than bringing it into all stores.”
Duff & Phelps will hold a meeting for creditors on August 4 at 11am at its offices at 32 London Bridge Street in London.