Blacks turns to bank as debt surges

The group, which has some 300 Blacks and Millets stores, has negotiated a new £40m banking facility from Bank of Scotland, effectively giving it an extra £2m until December 15.

The move follows a “significant increase” in its debt after a worse than expected 9.7 per cent drop in like-for-like sales in the 19 weeks to July 9 caused by “challenging market conditions” amid the squeeze in consumer spending.

Chief executive Neil Gillis said the facility was needed to provide “sufficient headroom”.

Mr Gillis said: “It is encouraging that the bank has been prepared to support the business and believes that our turnaround plans are working.”

Sales at the Northampton-based firm had been hit by the warm weather in the spring but increased by 3.2 per cent in the past six weeks as June and July brought more rain, “which has done the business a lot of good”.

He added: “Everyone always uses the weather as an excuse but most of our products - tents, jackets and walking boots - are about protection from the weather.”

But stripping out the effects of the weather, the “underlying state of trading was pretty good”, he claimed, and unlike many retailers the company was not having to discount its products to drive sales.

Mr Gillis was brought in three years ago to turn the company around and will be replaced by Julia Reynolds, the former boss of lingerie website Figleaves, next month.

He has overseen the closure of 88 loss-making stores, which helped cut losses to £5.3m from £43.6m in the year to February 26.

He added: “It’s pretty tough out there - the consumer is pretty nervous about buying big ticket items and most of what we sell costs north of £100. I think they will stay that way for the remainder of the year.

“I’m quite pleased that we have been successful in keeping the business afloat and keeping 3,500 jobs.”

Freddie George, a retail analyst at Seymour Pierce, reduced his price target for the company, saying he was worried about the increase in debt, which implied that the company has stock issues.