Studio Retail Group has become a casualty of the supply chain crisis, as it calls in administrators. Its shares have now been suspended and its transactional website is not currently taking orders.
The value retailer, whose Studio retail brand is ranked Top350 in RXUK Top500 research, had not been able to borrow the £25m in working capital that it needed in order to keep going while it sold stock that arrived late for Christmas and then remained unsold.
It said in a statement this week: “Following detailed discussions with our UK lenders, the company has not been able to reach agreement with them to provide the additional funding Studio requires.
“The board therefore now intends to file a notice of intention to appoint administrators to SRG and Studio Retail Limited, its wholly owned subsidiary, as soon as reasonably practicable. The board is taking this action to protect the interests of its creditors.”
Supply chain issues
The retail group, which trades as Studio and Ace, paid higher shipping and port costs to stock up ahead of Christmas in the face of industry-wide supply chain issues. It took steps including adding charter ships to its already contracted container shipping and sourced via its own office in Shanghai. But some of those deliveries were late as a result of the widespread supply chain crisis affecting the industry as a result of Covid-19 lockdowns. That left the retailer with leftover stock at a time when shoppers generally tighten their belts after Christmas – and this year more so because of the rising cost of living, particularly in fuel and energy prices. Studio said in a trading update two weeks ago that it would raise prices to cover its rising costs.
Studio Retail Group also said then that sales in the third quarter of its financial year – the 13 weeks to December 24 – were well ahead of two years earlier (+18%) but lower than a year earlier (-10%), a period in 2020 when shoppers bought online because non-essential shops were closed in Covid-19 lockdowns and trading restrictions. Sales in the first eight weeks of the quarter were 21% down on the previous year, but the final five weeks of the quarter, including Black Friday, were 9% up on the previous year, following stock deliveries.
It had predicted then that adjusted pre-tax profits for the full-year would be in the range of £28m to £30m. At that time, Studio Retail already had a fully drawn credit facility of £50m and said it remained well within its gearing convenant. But having failed to agree a short-term loan of £25m from its lenders to fund the surplus stock it is now calling in administrators.