Focus DIY pulls the plug - but Morrisons sales rise

Contrasting retail fortunes: ailing DIY chain Focus calls in the administrators, while Morrisons actually beats sales forecasts.

by Emma Haslett
Last Updated: 06 Nov 2012
A reminder of just how mixed the retail picture is at the moment... At one end of the spectrum, supermarket Morrison’s has just posted stronger-than-expected first quarter results, with a 2.5% rise in like-for-like sales. At the less fortunate end is Focus DIY, which has just called in the administrators after spending the last four years struggling under the burden of its debts (courtesy of private equity). But even Morrisons says it isn’t entirely confident about its outlook...

Focus's problems began well before the recession; in retrospect, its original private equity owners clearly loaded too much debt onto the business. But the downturn clearly didn't help, timing-wise. Distressed debt specialist Cerebrus bought the company in 2007 for £1 and tried to make a go of it, ploughing £200m into the business and bringing in ex-Iceland boss Bill Grimsey to turn it around. But with people steering clear of fripperies like home improvements as the recession bit, it couldn't turn things around - and by 2009, its debts had mounted to £230m.  

So while today’s news can hardly be described as unexpected, the firm’s 4,000 staff aren’t going to be impressed. Despite recording a pre-tax loss of £21m in the year to February 2010, Focus was still opening new stores as late as August last year, in Trowbridge (not exactly a hub of house-proud home owners, if you're not familiar with it).

It might seem odd, on the face of it, that Focus could survive the recession but fall over during the recovery. But for retailers, the current squeeze on consumer spending means times are even tougher than they were a few years ago. Just look at the raft of retailers that have fallen into administration over the last weeks, Oddbins, the Officers Club and Henleys, to name but a few. In fact, stats by Deloitte have shown that the number of retailers calling in the administrators has risen by 30% this year.  

All of which goes some way to explaining why, despite its impressive performance in recent weeks, Morrisons is still cautious about its outlook. The supermarket said that while Easter and the Royal Wedding had boosted sales (helped, presumably, by the appearance of Freddie Flintoff in its ads, at a time when the nation was feeling unusually patriotic), it plans to remain vigilant over the next few months. Sadly for Focus, that ship may have sailed.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today