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Peacocks’ tale is a cautionary one

Caroline Nodder

Another week, another high street name hits the financial buffers.

Another week, another high street name hits the financial buffers.

Peacock Group called in administrator KPMG this week and put the Peacocks chain into administration, with Bonmarché to follow if no buyer is found in the next few days.

The frustration for the management team, led by chief executive Richard Kirk, himself a 30% stakeholder, is that it’s not the underlying retail sales that are the issue here, it’s the legacy of debt and arguably an outdated business structure that is the problem.

And on a general level, the events this week highlight some important issues for retailers in the current climate.

First, a lot of the investment and acquisitions financed pre-recession are coming back to haunt them as the terms they agreed then with banks come up for renewal. Not only is most of their cash flow eaten up in paying down the debt, but banks looking at the business in the new post- (or even mid-) recession world aren’t willing to take the risks they once were.

Second, it points to the importance of evolution in business structures to reflect new consumer habits. The group has been saddled with an overly large bricks-and-mortar estate (more than 600 stores for its Peacocks chain) as well as the debt.

Although not the star of the value sector, the Peacocks chain was reportedly doing OK. But shoppers are moving online, and migrating from the high street to out-of-town centres and city centre shopping hubs. And the group hasn’t been able to sell its struggling and unwieldy 400-store Bonmarché chain, which has been earmarked for sale for some time.

Even though he ultimately failed, all credit to Kirk for trying to thrash out a solution rather than immediately going for a pre-pack. But it won’t be the last retailer in 2012 to suffer this fate.   

Readers' comments (13)

  • 'All credit to Kirk for trying to thrash out a solution rather than immediately going for a pre-pack'...Drapers Editor, are you having a laugh?
    1. Mr Kirk decided to 'Buy' the business from the public Company status it had before by loading the Co with highly expensive 'PIK notes' and massive debt.
    2. Private equity gambled mostly other people's money incl Banks, Suppliers, landlords and indirectly the Govt's too.
    3. Over expanded at a time of recession.
    4. Increased costs in a fancy new HQ
    5. Overpaid for the moribund business BonMarche

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  • Thanks for your comment Anonymous.
    I realise the above but hindsight is a wonderful thing isn't it? I doubt everyone would be in the mess they are now if we'd all taken heed of the points you raise four years ago. My point was really that Kirk hadn't immediately caved as others have in his position and had made genuine efforts to restructure the debt and find new investors. However unsuccessful this was in the end. The real damage was, as you say, done years ago. Caroline.

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  • Mr Kirk and the Peacocks management are certainly not deserving of any applause or credit...in the words of James Moore of the Independent 'the people who should carry the can for any looming redundancies at Peacocks are it management'.
    My advice to the Editor is to use your resources to follow the money, then give us an insightful and informed view of what has actually happened, rather than a second rate one.

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  • See Simon Bowers reporting in the Guardian on line today...MR Kirk £4.8million in Salary and Bonus since 2006, £13.5 million in personal windfall taken out of the business when this new holding structure was devised.

    If we follow the money and we can all see more clearly what has happened.

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  • Thanks again for your comments. This isn't just a Peacocks issue though is it. The salaries and bonuses you mention and the way the debt is structured are not unique. Far from it. And I'm sure if a lot of retail directors could go back in time and change how they ran and financed their businesses four years ago they would do things differently. People didn't criticise or complain back then though, and now we are left with the legacy. My comments about Kirk were to do with how he acted in the last week once the collapse had begun to unfold, in my humble opinion better than some in his position have, but the key issue is really how we get out of this mess now that the proverbial hens have come home to roost? Would welcome your views on that.
    Caroline.

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  • My final comment on this matter is this; what is the point of reading and subscribing to Drapers if we cannot get informed opinion? I would suggest that you get a financial journalist on board who can investigate, scrutinise and evaluate Retailers structures, accounts and Management strategies and then relay that to your readers.
    On this particular point, did Mr Kirk act better than some in his position, No...so I beg to differ with you. I suggest you read yesterday's comment from The Telegraph's Deputy Business Editor who describes the structure as unworkable from the outset, and suggests that even at the eleventh hour, Mr Kirk tried to change the deal. At any event the business was going to be put into Administration thereby stuffing the suppliers all along.

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  • Strongly agree with the last posters response. Drapers has to be more than a PR/Spin operation for brands to get their (often misleading and inaccurate) views across. There has to be a more critical and investigative approach by Drapers - if the people in question don't like it, that's too bad.

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  • You guys dont obviously read the FT !!!!!!!!!!!

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  • Good point...I do read the FT and am wondering why I'm bothering to read Drapers (the Industry specialist)?

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  • One thing that is clear in the FT and Ms Nodders analysis this company without the interest charges makes money!!!!! You dont need to be Roubhini, Gross, to see the company is worth saving. Everyone is good at blaming people after the event, but the real sympathy lies with supplier and the workforce. I see no value in some of the bitter remarks being made

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