At least two credit insurers have withdrawn cover from Footasylum and another has placed it in “special measures” following the footwear retailer’s recent profit warning and concerns about its ongoing weak trading performance, Drapers has learned.
It is understood that credit insurers including Euler Hermes and Nexus have either withdrawn cover or are considering dramatically reducing their exposure.
Meanwhile, Atradius is believed to have put Footasylum in “special risk measures”, following disappointing trading.
In September, the retailer warned that it expected EBITDA for the year to February 2019 to be “significantly lower” than the previous year.
It blamed disappointing store sales during July and August, and delays in its scheduled store openings and upsizings. Shares in the retailer plunged.
A month later, Footasylum revealed that it made a loss of £4m in the 26 weeks to 25 August, compared with a profit of £2.3m for the same period the previous year.
One source told Drapers the profit warning had dented its credibility: “The main issue [with credit insurers] is how credible can the turnaround plan be at the moment? With Footasylum, many insurers can’t foresee a return to profit in the short term.
“Looking at the high street, you have to wonder what kind of plan they have to reverse their fortunes.”
Shares in Footasylum were valued at 255p at the beginning of the year. However, this had dropped to 70p by late June and fell again following the profit warning in September. Today (2 November) it is trading at 31.3p – a decline of 87% since January.
One credit insurer said: “What underwriters want to see is a six-month period of stability in the business.”
Footasylum, Atradius and Euler Hermes declined to comment. Nexus did not respond.