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Blackfriar: Slaughter at Cattles as six executives get boot after review
CATTLES' slide has been painful and protracted, but it's not over yet.
What started as a suspension of its dividend in December swiftly became profit warnings, followed by job cuts, suspension of new lending, closure of marginal businesses and suspension of its shares.
Yesterday, it culminated in the sacking of six senior executives after a review into deep-seated internal problems found a potential 850m accounting black hole. Hidden bad debts have emerged with a vengeance in the cold light of the recession.
Chief executive David Postings and chairman Norman Broadhurst are bowing out too, and non-executive director Margaret Young becomes executive chairman, earning the dubious honour of trying to save the Batley-based company.
Now she must steer it through complex negotiations with its lenders, all of whom are trying to outmuscle each other.
If she can balance these competing interests and convince them Cattles is worth their support, Ms Young will achieve what few in the City think is possible. Her hope is that with its accounting problems out in the open, Cattles has a fighting chance.
Cattles lends to a marginalised sector of society, offering a service few others dare to. If it is forced into administration, a valuable source of credit for hard-pressed households will dry up, leaving loan sharks to feed off the spoils.
Cattles' chances of survival are slim, but for the sake of its thousands of employees, and the hundreds of thousands more customers it serves, its argument must be heard.
If not, Yorkshire's financial services industry will lose yet another venerable institution.
Following the demise of Woolworths and MFI, there has been much speculation about who will collapse next in the worst recession since the 1930s.
Last December, Blackfriar wrote that there were serious doubts about the future of two Yorkshire retailers – Poundstretcher parent Instore and Barratts to PriceLess shoe chain Stylo. Stylo did indeed collapse two months later, although half the stores and jobs were then rescued by the founding Ziff family.
So what of Huddersfield-based Instore? At the end of last year the group blamed the bad weather (that old chestnut) and higher energy costs for increased losses and a slump in sales. Yet it said it remained "cautiously confident" that the trend towards discounters will boost the business.
But the move to discounters has already transformed sales at budget supermarkets Netto, Aldi and Lidl, so why hasn't the same effect been seen at Instore?
On Tuesday, the embattled store group announced plans to ditch the Instore name and convert all of its stores back to the original Poundstretcher name following an annual loss of nearly 6m.
Instore said attempts by former management to move mid-market had proved a mistake and the group will return to its value for money heritage.
The decision follows the arrival of new chief executive Aziz Tayub, whose cash and carry group Crown Crest now owns a controlling 57 per cent of Instore.
Under the plans some 150 Instore shops will revert to the Poundstretcher name giving the group a total of 309 Poundstretcher stores.
The decision is the only sensible one to come out of Instore in the past three years.
Under Tayub, the group is working hard to control costs. This includes sourcing more from abroad and introducing more branded food and toiletries. Instore's links with Crown Crest gives it access to a range of well-known food brands including Heinz, Walkers and Cadbury's.
Tayub is well respected in retail circles and if he can't fix Instore, Blackfriar suspects no-one can.
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Weather for Yorkshire
Wednesday 23 May 2012
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Temperature: 11 C to 24 C
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