Troubled fashion chain Bonmarché has warned that trading in the first quarter has been “poor” and reversed its opposition to the £5.7m takeover offer from UK billionaire Philip Day.
Its shares fell 26% as it blamed bad weather for its performance and said Mr Day’s offer was now more acceptable.
It warned that it was also possible that its losses could be greater than the £5-£6m it was previously expecting.
The Yorkshire-based chain has 312 shops with clothing aimed at over-50s women.
It employs 1,900 full-time equivalent people, but Edinburgh Woollen Mill Group-owner Mr Day has previously warned he expects a “material reduction” in headcount at the chain.
Through his Dubai-based investment vehicle, Spectre, Mr Day made a mandatory takeover bid in April after buying a 52.4% stake in the retailer.
The offer is at 11.445p per share. After the trading update, the shares fell 26%, to a price just below that level.
The Bonmarché board had been holding out against the offer, saying its own cost reduction programme would improve performance.
It said again that the offer “does not adequately reflect the potential longer-term value of the business”, but acknowledged its “poor” trading had changed the picture.
“The increase in uncertainty that has developed, reflecting the trading and financial position of the business during the first quarter of the financial year, makes the certainty represented by the offer potentially more attractive in the short term.”
The terms of the offer are “now fair and reasonable”, the company said.
It said the medium and long-term prospects for the Bonmarché business were good, but it had been told by its auditors that unless trading improved by the time of its results on 26 July, they might include a caveat in its results about its ability to operate as “a going concern” in the long term.
Targeting the over-50s
If the deal goes ahead, it could reunite Bonmarché with Peacocks, which was bought out of administration by Mr Day’s Edinburgh Woollen Mill in 2012. At the time, Bonmarché was kept out of the administration and bought by a private equity firm before being floated on the stock market.
“Whether the Bonmarché brand is about to become another ‘name’ that disappears from the High Street remains to be seen,” said Emma-Lou Montgomery, associate director at Fidelity’s share dealing service.
Richard Hyman, independent retail analyst, said its problems reflected what he regards as the difficult conditions on the High Street.
“We’ve got a retail recession in my opinion,” said Mr Hyman. “The bottom line is there are very few retailers out there performing as they planned.”
Bonmarché also had issues of its own, he added: “They’ve got too many shops. The main thing is, their demographic [over-50s women] can make do with clothing they’ve already got.”
Kate Ormrod, lead retail analyst at Global Data, said that Bonmarché should have a captive audience for its products, especially after Marks & Spencer had turned its focus on the family market.
“Their offer is clearly not resonating with shoppers,” she said.