Hitting its stride?

Job cuts, store closures, profit warnings, major restructuring and a CVA – it’s fair to say that Blacks Leisure has had a difficult year or so. But that, argues its chief executive Neil Gillis, was then and this is now. Could the leaner-looking Blacks be a genuine employer of choice? See what the man at the top says and you decide.

For a period last year, news stories about Blacks Leisure were almost universally negative. It looked like the group was inextricably caught in a financial whirlpool and ultimately fated to be pulled under; another victim of the credit crunch. Nearly 90 loss-making stores were closed, the head office team was trimmed, it turned in an £11.9million loss and its boardwear subsidiary Sandcity was placed into administration. It was all rather bleak.
But then in November 2009 Blacks’ creditors, primarily store landlords, agreed the terms of a Company Voluntary Agreement (CVA) and almost overnight the profile of Blacks Leisure changed. There were distinctly positive noises emanating from its Northampton head office. The CVA enabled Blacks to withdraw from the leases of 101 unoccupied or loss-making stores. This allowed the group to continue trading from its remaining 290 stores and thus safeguarded more than 4,000 jobs.
In the proverbial nutshell, the message coming from Blacks was that it had ditched the elements of the business that had been dragging it down (principally boardwear stores) and what remained was actually a company with a positive future.
But inevitably what went before will linger in the memory and generate wariness among prospective employees – irrespective of any apparent change of fortune. So we thought we would put some pretty direct questions to the man in charge, chief executive Neil Gillis, about the past, present and future of Blacks Leisure.
Appt: What were the hardest moments over the last year or so? Did you feel that going under for good was a realistic possibility at any point?
NG: Blacks is a typical turnaround case study. Before the recession began it was a loss-making business so returning it to profitability in the middle of a recession has been a major challenge. For that reason we had to take more drastic and rapid action than would otherwise have been necessary.
All of the actions we took – from closing Boardwear to the CVA were designed to preserve a business which employs over 4,000 people across the country. These actions, whilst necessary, are never pleasant and the worst aspect was the fact that a lot of hard-working people in our company were nervous about the future while these actions were undertaken. Having completed these actions we are in a much stronger position. We now have two years of bank facility with Lloyds at a higher level than before and our like-for-like sales have been positive for every single month since August 2009.
Appt: Were there positive moments over this period too and, if so, what were they?
NG: The most positive moment was the successful CVA which preserved 4,000 jobs. In addition, although we closed 90 stores we were able to redeploy 20% of employees affected into new jobs across the estate.
Appt: Rightly or wrongly a CVA is seen by many as a stay of execution. As such, please describe the plans for 2010 at Blacks Leisure and reasons behind your optimism for the company.
NG: It is not a stay of execution. It is a permanent and binding legal agreement with landlords which cannot be changed. We now have a banking facility for two years at a higher level than before and our last five months of positive like-for-likes demonstrate that the trading performance of the business has also turned a corner.
Appt: People are naturally going to be more than a little nervous about committing their futures to a business that has shut so many stores and endured so many headlines as Blacks has in the last few months. What would you say to reassure them about a potential future at the company?
NG: That we are now in a much stronger place than before and that much of the hard work involved in the turnaround has now been completed. The next phase is one of expansion and growth, as we plan to open new stores and refurbish our existing ones.
Appt: What do you think the company will look like in 12 months’ time? Three years?
NG: In 12 months time we will be halfway through our store investment programme and we will be growing rapidly, taking on more individuals and providing great career opportunities for those who wish to develop their careers in a growing company.
In three years time the first phase of store investment will be completed and we will be managing a well-invested, growing and successful company.
There are certainly signs that Blacks Leisure is seeking to embrace the future it has been re-given. Stores are to be refitted, and there is even talk of new stores being opened. However, the real poster child for this ‘new Blacks’ is the company’s Pioneer project. The programme is designed to give official recognition to the top 70 managers in the Blacks Leisure estate. These managers will receive additional development, training and autonomy in how they manage their business. According to the company, the programme will also “enable store and town managers to use better reporting tools, better flexibility of payroll spend and very importantly be rewarded with highly attractive bonuses!”
The project was launched earlier this year with a two-day event held on the bonny, bonny banks of Loch Lomond. The 70 chosen managers were joined by members of the company’s board, including Neil Gillis and former Hobbs boss (and now Blacks director) Nick Samuel. Activities included a gruelling 3,000-foot hike up the Ben Arthur mountain and an intense day of workshops and presentations explaining what Pioneer is and how it would affect them. Workshops were delivered by many of the directors including the retail director Joe Ulloa and the chief executive.
So, why would the business spend so much time and money on a select few group of managers? Mr Ulloa gave his perspective:
JU: This was an opportunity for us to recognise some of the key talent in our store manager and retail population that have made a difference in our progress to date and also engage them on the next phase of our business plan, in which they will play a crucial part. Our top 70 stores contribute a significant amount of the sales and profit and by empowering and developing the management teams in these stores we will not only see more impressive sales returns but we will also be producing senior managers of the future. As well as their financial performance the top 70 stores will also play a key part in piloting and benchmarking initiatives from which we can then roll out to the rest of the estate.
Echoing and extending these sentiments, the chief executive commented on the inaugural Pioneer event, saying:
NG: It’s very important that we don’t lose our identity as the UK’s leading Outdoor retailer. This event had a key business message but to reinforce it with walking in the shoes of our customers and being supported by one of our biggest brands [The North Face] combines our key strengths. I am so pleased that we can start 2010 with such a positive message to our staff and celebrate the first of many more exciting projects and events to come.
The Pioneer project is not only symptomatic of a new mindset the company is endeavouring to instil into its people, but also of its determination to throw off the negative associations of the past. But nothing evaporates negativity like success. The double-digit like-for-like sales increase for ongoing stores that Blacks produced across the half-year to January 7th, therefore, certainly constitutes a good start. Whether this is a permanent revolution for Mr Gillis and company, will only truly be measured in trading statements yet to come.