The board of directors of Venue Retail Group (VRG), the new Swedish retailer of shoes and accessories that has emerged from the recent sale of most of its low-priced Wedins shoe stores to Eurosko, has called an extraordinary shareholders’ meeting on May 8 to approve new measures intended improve its liquidity and its solvability after another series of financial losses.
The new package of measures, which has already been approved in principle by the major shareholders, should raise the group’s cash resources by about 43 million Swedish kronor (€4.03m-$5.4m) and take its equity ratio back up from 33.2 percent to 49 percent. Swedbank has agreed to support the move with a bridge loan of between 25 million SEK (€2.3m-$3.1m) and 30 million SEK (€2.8m-$3.7m) until the transaction is completed, while extending an existing loan of 30 million SEK.
The capital of VRG is to be raised by up to 110 million SEK (€10.3m-$13.7m) by issuing convertible bonds to existing shareholders. Five of them have already agreed to subscribe to bonds worth 66 million SEK (€6.2m-$8.2m). Five will get an additional 22 million SEK (€2.1m-$2.7m) worth of bonds through the conversion of outstanding loans of around 50 million SEK (€4.7m-$6.2m). The subscription period is tentatively set to end on June 22 and the holders of the bonds, which will be tradable, shall be able to convert them into shares on June 30, 2015.
The refinancing package also calls for a reduction in the equity capital to offset recent losses and for a renunciation by the shareholders to any dividends for the next three years unless the capital is increased by the same amount.
VRG announced these decisions by the board while reporting a net loss of 13.5 million SEK (€1.3m-$1.7m) for the second quarter ended Feb. 28, compared with a loss of 13.2 million SEK in the same period a year ago. For the full first half of its financial year, the net loss amounted to 18.2 million SEK (€1.7m-$2.3m) and compared with a net profit of 3.6 million SEK in the year-ago period.
Management had previously predicted a return to profit for the group in the current fiscal year, but it is now expecting that this will happen only in the second half.
One of the factors for the most recent losses was a decline in the quarterly gross margin to 54.2 percent from 57.0 percent a year earlier. Sales promotions at Wedins stores played a certain role, but management points out that the gross margin would have nevertheless grown to 57.7 percent if currency exchange rates had remained the same. Interestingly, some suppliers asked to be paid in euros rather than dollars, augmenting the effect of the Swedish krona’s devaluation. For the six-month period, the gross margin was down to 56.4 percent from 60.0 percent.
Led by its former buying director, Susanne Börjesson, the new management of the group said that product ranges in each of its retail chains are being reviewed in order to make them more profitable.
VRG’s main remaining shoe retail operation, Rizzo, suffered an operating loss of 3.3 million SEK (€0.3m-$0.4m) on stable sales of 45.1 million SEK (€4.2m-$5.6m) in the latest quarter, compared with a profit of 1.3 million a year ago. The four remaining Wedins stores generated a loss of 5.6 million SEK (€0.5m-$0.7m) on sales of 16.7 million SEK (€1.6m-$2.1m).
Important changes in the structure of the group led to a decline in its total turnover to 222 million SEK (€20.8m-$27.6m) for the latest quarter, down from 257.6 million SEK a year ago, and to 431.2 million SEK (€40.4m-$53.6m) for the half-year, down from 480.0 million SEK. The main changes were the acquisition of a Norwegian chain of 43 leathergoods stores in October 2007, Morris, whose integration into the group caused further temporary losses, and the sale of 59 Wedins stores to Eurosko last September.
At the end of the second quarter, the largely downsized group traded through a total of 151 stores in the Nordic countries. Of these, 134 sell accessories under the Accent or Morris banner, and 13 sell high-quality shoes under the Rizzo name. One of the Rizzo stores was a former Wedins.
Rizzo represented only 20 percent of sales in the second half of last year, but the group wants to develop this format further. Another Wedins store in Malmö will be converted to the Rizzo format. In addition, Rizzo will also open a new store in Malmö and add two others in Stockholm and Oslo. The Accent stores performed very well during the month of March.