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Restructuring firms circle Cruise chain

Approaches come 18 months after mini-chain’s pre-pack administration.

Restructuring specialists Hilco and GA Associates are understood to be ready to swoop on designer mini-chain Cruise amid rumours that trading has nosedived.

Cruise, which has 12 stores, and emerged from a pre-pack administration just 18 months ago, is understood to have suffered a sharp decline in sales after its customer base stopped splashing out on designer goods in the wake of the austerity Budget. The recent snow is believed to have accelerated its difficulties. A source close to the business told Drapers that trading at Cruise was down by double digits on a like-for-like basis. A second source said: “I would defy anyone else in the independent sector to say anything much different to trade being really tough. But the plan is for Cruise to be profitable by this year end [January 2011].”

Hilco, GA Associates and other unnamed restructuring specialists are thought to have made approaches direct to the Cruise management team and to its bank HBOS. It was not known whether discussions had actually begun as Drapers went to press.

The second source added: “Cruise has had approaches from venture capitalists as well. There could be an opportunity to merge with other indies or buy other indies to get scale. There have been talks with investors…”

It is unclear what the future of the business would be if a restructuring specialist took control. Restructuring specialists tend to sell businesses on to a third party, break them up or wind them down.

Cruise emerged from a pre-pack administration in May 2009 after shedding about six of its shops. The administration was blamed on the fact the business was owned by an Icelandic fund - Kcaj - which struggled to survive in the wake of the global banking meltdown and which could not deliver on its promises to support Cruise’s expansion plans.

James Pow, a non-executive director of Cruise at the time of the administration, was installed by HBOS as chief executive in late 2009, following the departure of managing director John Heath.

Following Pow’s appointment he implemented a new strategy to bring in smaller designer labels and work with suppliers to spread deliveries so the stores had constant “newness”.

As a result Cruise introduced the much-lauded London Fashion Week designers Christopher Kane and Erdem and brought Burberry Prorsum back into its mix. The chain also stocks luxury super brands such as Gucci, Prada and Jimmy Choo.

Accounts filed at Companies House for Cruise Fashion, the parent company, showed the business had sales of £21.4m for the period between May 15, 2009 to January 30. It made an operating loss of £315,000 over the period, but this was blamed on an exceptional cost of £478,000 relating to the reorganisation of the business post administration.

Separately, buying controller Louis Darcy left the business last month. It is not known whether he had another job to go to.

Pow, Hilco and GA Associates declined to comment.

Cruise: a recent history

1981 Founded by Jim Gibson in Edinburgh

2006 Gibson sells Cruise to Icelandic fund Kcaj for about £7m

2008 Icelandic banks collapse

2009 Cruise completes pre-pack administration, shedding several stores. James Pow installed as chief executive

2010 Cruise enters talks with restructuring firms

Store locations Aberdeen, Belfast, Derby, Dundee, Edinburgh, Glasgow, Leicester and Newcastle. It also trades from Cruisefashion.co.uk

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