(qlmbusinessnews.com via theguardian.com – – Wed, 31st Oct 2018) London, Uk – –
Fears for hundreds of jobs as Sports Direct buys up Evans Cycles
Mike Ashley’s Sports Direct has bought Evans Cycles out of administration but has warned that it may have to close half the specialist retailer’s 62 stores, putting about 440 jobs at risk.
Evans, which traces its roots back nearly 100 years, had been seeking a buyer after its management team said they needed £20m for a turnaround plan that its former private equity owners were unwilling to fund.
Sports Direct bought House of Fraser in a similar prepack deal in August and is also thought to be interested in buying Debenhams, the department store group in which it owns a large stake.
Ashley, chief executive of Sports Direct, said: “We are pleased to have rescued the Evans Cycles brand. However, in order to save the business, we only believe we will be able to keep 50% of stores open in the future. Unfortunately, some stores will have to close.”
Evans, which employs 1,300 people in total, of whom about 880 work in store, had been struggling to survive amid tough high street conditions that have already seen Toys R Us, Maplin and House of Fraser collapse into administration, and a string of other well-known names close their stores
The cycle retailer also faced fierce price competition, particularly from the fast-growing online sports retailer rival Wiggle.
Evans found itself nearly £6m into the red in 2016 and has since faced rising business rates, an increase in the minimum wage and a fall in the pound’s value, which has made imported goods more expensive. In the year to October 2017, its sales rose nearly 2% to £138m, but the company recorded another loss, of £2.5m.
Amid the difficulties across the retail sector, the private equity firm ECI Partners, which bought Evans three years ago, and the retailers’ lenders, AIB and HSBC, were unable to agree on a deal to fund management’s rescue plan.
James Keany, at the advisory firm CBRE, which is retained to manage property for Sports Direct, said: “We are looking forward to working with landlords in order to help create a sustainable business. We will make contact with landlords over the next few days and discuss the future of individual stores.”
Sports Direct’s warning that it was likely to close half of Evans’ stores appears to have come as a surprise to PricewaterhouseCoopers (PwC), the advisory firm that sealed the sale of Evans and put it into administration immediately ahead of the sale on Tuesday.
Matt Callaghan, joint administrator and PwC partner, said: “Evans is a longstanding, well known and trusted brand with nearly 100 years of heritage in the cycling market. To have managed to preserve the business and transfer all staff to the purchaser is particularly pleasing; 2018 has been a very difficult trading year for the business, in part due to the impact of the extended winter weather in the early part of the year and a lack of cash to invest in stores and develop the online platform. A combination of losses, the capital expenditure requirements and tightening credit has led to a liquidity crunch.”
By Sarah Butler