Thursday, April 08, 2010

BLACKWELLS - boom to bust?

Blackwell UK has made an operating loss of nearly £9.4m for its most recent financial year, and is blaming supermarkets and e-tailers for hitting sales and eroding margins through "buying" sales with excessive discounting.

For the 12 months to 27th June 2009, Blackwell UK saw turnover fall from £77.8m to £74.2m. Although costs were also reduced - from £56.6m to £54.9m - administrative expenses rose more than £1m to £28.7m, resulting in an operating loss of £9.4m. The retailer lost roughly £6m the previous year.

As a result, the company's board is planning yet another restructuring, what appears to be the third in as many years. This restructuring will be combined with "a continuous improvement plan in a number of critical services areas" to reduce losses, the company said. Blackwell has already undergone one series of restructures since Andrew Hutchings became chief executive in September 2008, which resulted in the combining of the retail and library supply businesses into one operation, and the departure of commercial director Sue Townsend.

In the review of the business, the directors described it as a "challenging year". The review added: "The bookselling industry in both academic and trade sectors endured unprecedented level of discounting, which damaged sales and margins across all categories.

"This was also evidenced in the market share growths for both supermarket and online retail, where sales were bought at the cost of low margins or break-even deals."

The retailer's library services arm also had a "challenging year", with the report saying "we saw downturns across all markets against the previous year", as a result of funding cut backs and unfavourable exchange rates, owing to the economic situation.

However, the company emphasised that "extensive work around lean methodology meant we were able to take substantial cost out of the business".

In December 2009, Blackwell secured a new three-year loan from Toby Blackwell Ltd for £7m, replacing the asset-based lending facility, which ended that month. In May last year Toby Blackwell told The Bookseller that he had secured the future of the Blackwell bookshop chain as a private business by setting up an "impervious" 80-year trust that will take ownership of the voting shares after he dies.

Blackwell sold the North American division of Blackwell Book Services to US distributor Baker & Taylor in December last year.