The timing of this move by Peacocks’ lenders appears unusual at first glance. The chain has just had a successful Christmas period, with sales up 17%, mostly through a lucrative partnership with singer Daisy Lowe. And, looking back over the firm’s trading history, its rise has been nothing short of meteoric.
Chief executive Richard Kirk bought out the Peacock family back in the nineties, and pulled off an astounding turnaround, which saw the brand slashing prices - cheap and cheerful is an understatement - and churning out catwalk-to-high street fashion lines with staggering speed. Today, Peacocks boasts 600 stores and concessions in the UK, 117 stores around the world, and a growing presence in Russia and Eastern Europe. It owns the Bon Marche fashion retailer, tapping into the plus size demographic. And it's also one of the few retailers in the UK that's given Primark any kind of competition.
So what went wrong? The debt mostly stems from a management buy-out, undertaken in 2005. After a broadly poor performance across the retail industry, the then public Peacocks’ share price took a hit, even though the retailer had posted better-than-expected figures. Kirk decided that enough was enough and moved to take it private, with the backing of US hedge funds Och-Ziff and Perry Capital, investment vehicle Echelon, and Goldman Sachs.
Hence the towering pile of debt.
In the current challenging retail environment, Peacocks has struggled to reduce its liabilities. The latest results published by the company only go up to April 2010. These show that the fashion chain made operating profits of £27m to year end. However, after £77m in bank loans and overdrafts are factored in, Peacocks actually made a pre-tax loss of £56m.
Two years on and the fashion chain has run out of time. Kirk has been given just a few days to find a white knight to save the brand; otherwise the firm will enter administration, putting thousands of jobs at risk. And it doesn’t look good. A spokesperson for RBS, one of Peacocks’ principle lenders, told BBC Wales yesterday: ‘New investors willing to inject sufficient capital could not be found.’ Even the mooted sale of Bon Marche won’t make enough cash to full the debt hole.
Hopefully, Peacocks will find salvation in the 11th hour like outdoor products retailer Blacks, which is currently in ‘advanced talks’ with JD Sports, and the Barratts/Priceless operation, which has just been bought back out of administration by Michael Ziff, saving around two-thirds of jobs.
Peacocks will definitely be fanning its tail to find a suitor over the coming days. Let’s hope it pays off.