High street retailers that are losing money and have a lot of debt need the support of their banks, their suppliers and their landlords to keep going.
Today’s shock announcement that Clinton Cards’ banks are no longer interested in supporting the business in its turnaround plans is less of a surprise than the news that Clinton’s biggest supplier, American Greetings, is apparently not interested either.
Time will tell what American Greetings’ exact motivation is in wishing to put the business into administration. At best, it may feel that by taking charge of Clinton’s debt, it can control the inevitable process of store closures in a more seemly and sympathetic way than if the banks pruned the business back in a more radical manner, to try and protect its maximum order volumes.
At worst, it may simply feel that there is no point in trying to stand in the way of the structural tide engulfing Clinton Cards in the UK and that it no longer feels confident of getting paid on time.
The fact that like-for-like sales at Clinton’s are running down by 3.5% does not augur well, as the very high operational gearing in the business will mean that trading losses are escalating.
This says something about the decline in the card market overall in a world of emails, e-cards and ever-increasing postage prices. But Clinton’s problems also reflect the fact that the card market is increasingly shifting towards the supermarkets and the discounters such as Card Factory, with WHSmith and the charity shops chipping in as well by offering increasingly good ranges of greetings cards.
There are parallels here, of course, with the problems of Game and HMV. In the case of Game, its suppliers were surprisingly unsympathetic to its predicament, given its high market share, with the refusal of some of them to supply Game with new titles marking the beginning of the end.
The odd thing about the contrasting way in which the big CD and DVD suppliers have bent over backwards to keep HMV going is that their markets are going digital faster than Game’s markets are, which would argue for less support from the suppliers of physical product. But perhaps HMV did not take its suppliers for granted and kept them onside in a way that Game (and perhaps Clinton) did not.
Whatever happens, we will never know what would have happened if Clinton had not made the massive strategic error of buying the struggling Birthdays chain a few years back, which compounded its exposure to the high street card market, and had made quicker efforts to move its business online.
We may also never know what the new chief executive, Darcy Willson-Rymer, was about to unveil to the world in his much-awaited strategic review of the business and whether he saw the future of Clinton as selling cards or selling toys and gifts.
What is clear is that Clinton going into administration is unwelcome news for the shopping centre industry, given Clinton’s importance as a key tenant in generating rental income.
But what goes around comes around… 25 years ago Clintons was the one of the great “space bandits” in the high street, but now it is struggling to pay those rents in prime sites.
One of life’s mysteries is why Clinton’s rival Card Factory is so profitable and the answer is partly to do with the much lower rents that Card Factory pays in more secondary locations.
Fortunately for the landlords, the “space bandits” are always with us and new tenants will emerge, but the future of Clinton is as a much shrunken business.
About Nick Bubb
Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos “Retail Think-Tank”.
Clinton Cards folds into administration, 8,000 jobs at risk
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Nick Bubb's verdict: The demise of Clinton cards