Bonmarche set for job cuts and store closures following sale

The prospective new owner of troubled women’s clothing chain Bonmarche has warned of job losses and store closures as he attempts to turn the company around.

Bonmarche specialises in clothes for women over 50

Edinburgh Woollen Mill owner, billionaire Philip Day is behind the offer for Wakefield-based Bonmarche, which values the company at just £5.7m.

The mandatory offer follows Mr Day’s purchase, through holding company Spectre, of more than 26 million shares in the over 50’s fashion retailer. This represents 52.4 per cent of the company, putting Spectre above the 30 per cent threshold at which it must make a takeover approach.

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Spectre expects to implement “a material reduction in headcount” at Bonmarche, saying that stores identified as underperforming may be closed unless reduced rents, staff reductions or other cost saving measures can be successfully implemented. Bonmarche employs 1,900 staff.

At just 11.445p per share, Spectre’s offer represents a significant discount to Bonmarche’s closing price of 18p on Monday.

Spectre said it would undertake a profitability assessment on Bonmarche’s estate of more than 300 stores.

It comes after Bonmarche issued its third profit warning in just six months in March.

The womenswear retailer said it had seen significantly weaker trading since the start of March, reversing a bounce back in January and February after it resorted to heavy discounting to shift stock.

In a statement about the takeover offer, Spectre said: “Against the backdrop of the significant decline in Bonmarche’s profitability, Spectre believes it is well positioned to provide advice, guidance and support to secure the long term future of the Bonmarche business, its stores and employees.

“The owner of Spectre, Philip Day, has a successful track record within the retail sector, especially in turnaround and distressed situations.”

Mr Day’s name has been linked with several retail turnarounds. At the weekend he was named as a bidder in the race for collapsed womenswear brand LK Bennett, though he later withdrew from the process.

Last year he was one of the potential buyers circling House of Fraser, which was eventually sold to Sports Direct owner Mike Ashley.

His other investments include Peacocks, Proquip, Austin Reed, Country Casuals, Jaeger and Jacques Vert.

Maureen Hinton, global retail research director at GlobalData, said: “This is an excellent result for Bonmarche, which is struggling following profit warnings and a challenging market. It rejoins its former sister company Jane Norman which Day saved several years ago and continues to trade.

“Being taken out of constant City reporting and scrutiny will allow the retailer to take a long-term view of the business and benefit from the shared assets of the Edinburgh Woollen Mill group.

“It must be a relief for management, though the offer for shareholders at 11.445p per share is way below the 120p of last summer is not such a relief, but a recovery in the share price was going to be very challenging.“

Bonmarche’s shares were down 22 per cent this afternoon at 14p.

Last month Bonmarche warned of a bigger full year loss and reported quarterly sales below expectations.

The firm said it believes sales are likely to remain under pressure.

With the UK heading for a potentially messy and yet unclear exit from the European Union, consumer spending is drying up, forcing retailers to sacrifice profits for sales.

The company said it expects an underlying pre-tax loss of between £5m and £6m for the year to the end of March.