Several weighty suppliers are terminating their relationships with Blacks Leisure, apparently due to some tightened purchasing conditions that the British outdoor retailer sought to impose earlier this year in an effort to redress its sagging margins.
Mountain Boot Co., the British distributor for Deuter backpacks and Scarpa climbing shoes, has ceased delivering both brands to Blacks. Quiksilver confirmed to us that it would quit selling through Free Spirit, the board sports stores belonging to the Blacks Leisure group, from next year. There are probably others have a reacted in a similar way.
Tensions arose between Blacks Leisure and some of its suppliers after they were informed of a management and policy change that called for tougher terms. Among the reported demands were an additional 30 days of credit and a discount of 5 percent, described as a contribution to Blacks’ marketing costs.
Expressed in writing or by telephone, the requests apparently came just a few days after Blacks’ announcement of disappointing trading results early last month, which prompted the group to announce the closure of 45 loss-making stores. Furthermore, the company decided to halt investments in large out-of-town stores and to fully review its operations, with cost control among the issues to be examined. Don Trangmar, former menswear director at Marks & Spencer, was asked to step down from Blacks’ board of directors to help implement the changes.
Quiksilver UK indicated that it had long enjoyed a mutually beneficial relationship with Blacks but could not agree with the new terms laid out by the retailer. Managers for the two companies met to discuss the conditions, but their views could not be reconciled. DC, the brand of skate-oriented footwear belonging to Quiksilver, is expected to end its relationship with Blacks as well.
This split is a gutsy move for Quiksilver in the UK, where Free Spirit is the leading integrated chain of boardsports stores. The company itself has 18 single-brand stores in the country, trading under the Roxy or Boardriders banners, and it intends to open more over the next years.
While some of the moves launched by Blacks apparently irked a few suppliers, the retailer’s all-out effort to raise margins has been more warmly welcomed by investors. The share price briefly stabilized, although it declined again over the last days to reach about 275 pence, less than half the level of last year.
More details might emerge next week when Blacks releases its results for the financial year ended Feb. 28, 2007, which will contain an exceptional provision of about £14 million (€20.6m-$28.0m) for the restructuring measures. The retailer’s management is confident that the wide-ranging review of its operations will improve the company’s performance over the next 12 months.
