In a surprise move, Clinton Cards' main supplier bought £35m of its debt from the banks, only to then call in the loans. The result was that Clintons collapsed into administration on Wednesday, putting the jobs of 8,000 workers and the future of its 767 stores at risk.
The cards and gifts retailer has been struggling with falling sales in recent years, and in the six months to the end of January 2012, sales fell 1.1% to £197.1m and the firm lost £3.7m. With a couple of loans on the go (totalling £35m), the firm was in already in a precarious position given its shrinking sales.
When the two banks sold the loans to US rival American Greetings, who promptly called for the money back, it caught Clintons by surprise and it was unable to pay. The firm threw in the towel and called in the administrators on Wednesday, after requesting that trading of its shares should be suspended.
The move by American Greetings cut short the plans of new Clintons’ CEO Darcy Willson-Rymer. He joined Clintons last October from Starbucks, and had begun implementing a strategic review that planned to reduce head count by 15% and improve customer focus in an attempt to restore profitability. Margins have been shredded in the last 12 months by the need to clear existing stocks and sell lower-margin products to customers who are more cash-strapped than ever.
Making matters worse for UK retailers, the wettest April on record saw like-for-like sales on the high street fall 3.3% compared with April 2011, according to the British Retail Consortium. It’s not doom and gloom everywhere: Sainsbury’s today reported a rise in turnover and profits. But for Clintons, the battle to keep its head afloat in the face of growing online competition couldn't be won.