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LK Bennett's future uncertain as administration looms

Following LK Bennett’s filing of notice of intention to appoint administrators last week, Drapers investigates what, if anything, can be done to save the retailer as it teeters on the brink of collapse.

Unless its founder, Linda Bennett, can raise funds to seal a last-minute rescue plan, administrators from audit firm EY could be appointed within the next few days, putting 480 jobs and 41 stores at risk.

LK Bennett cited rising business rates and rents as the reason for the possible administration. Drapers understands LK Bennett has been seeking an investor, but no deal has been forthcoming.

A source close to the situation said: “LK Bennett is looking like it will go into administration or go through a pre-pack administration. Linda is currently trying to find a solution, but it is days away [from falling into administration]”.

LK Bennett is looking like it will go into administration or go through a pre-pack administration

Source close to the situation

Several retail industry insiders have speculated that Philip Day, chief executive of Edinburgh Woollen Mill Group, will purchase the company. However, Drapers understands the group is not making a bid for the business.

“The brand still has resonance and it’s a very attractive business,” the chief executive of one womenswear brand told Drapers. “It is an obvious one for Philip Day to invest in, as it would fit well with his other brands, like Jaeger.”

She added: “[The Foschini Group – owner of Whistles, Hobbs and Phase Eight] is not the type of business to buy out of administration. It would have done it already if there was a deal to be done. Reputationally, I don’t think that’s the way it likes to operate.

“Meanwhile, Mike Ashley is not interested enough in brands, such as LK Bennett, on the high street, and I don’t think he’s particularly familiar with womenswear.”

Store burden

Jonathan De Mello, head of retail consultancy at Harper Dennis Hobbs, said Sports Direct-to-House of Fraser tycoon Mike Ashley may be interested, but warned that any new owner would need to close half of the LK Bennett store estate to survive: “I think it will be bought because it has a good USP – it has just lost its way a little bit.

“The business will be attractive to the likes of Philip Day and Mike Ashley. Either way, if someone buys LK Bennett, I would say around half of its 41 stores will have to close. It has been struggling as a result of business rates and rent rises. If these can be taken out of the equation, then it will be able to survive.”

I think it will be bought because it has a good USP – it has just lost its way a little bit 

Jonathan De Mello, head of retail consultancy at Harper Dennis Hobbs

Richard Lim, chief executive of research consultancy Retail Economics, said LK Bennett needed to adapt its proposition for it to resonate with its target audience: “Retailers that thrive are the ones that have embraced online and digital, and link all of those things up. LK Bennett has been a bit behind the curve with this.

“Whether or not it’s too late for the brand remains to be seen. If it goes through an administration process, there will be bids on the company. Online will be one of the key strategies for the brand to turn the business around.”

However, retail analyst Richard Hyman believes the loss-making business would not be attractive to investors: “When a well-known brand gets into trouble, there’s always talk of people being interested. This is a loss-making business. How many people want to put money into a loss-making business?

“It’s highly likely to go into administration in the next few days. Once it’s in administration, then someone can buy bits of it rather than the whole company. People would be interested in that, but there’s no future in it. Linda Bennett will be bitterly disappointed because she went back in with really good intentions.”

LK Bennett made an operating loss of £5.9m, excluding exceptional items, for the year to 31 July 2017. This compared with an operating profit of £100,000 for 2015/16. Sales edged down 1.8% year on year to £77.4m. However, like-for-like sales increased by 3.7%. Online sales made up 33% of total sales, stores 61% and wholesale 6%.








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