U.K.'s Jessops to Close Shops and Cut 550 Jobs
British photographic retailer Jessops plans to close about a quarter of its shops with the loss of 550 jobs, it said on Thursday as it seeks to slash costs in the face of a steep downturn in trading.
Jessops, which has been hit hard by falling digital camera and camcorder prices as well as increased competition from Internet-based retailers, also said it had agreed a new banking facility to give it short-term financial security.
Jessops shares, down 88% this year following two profit warnings, responded positively and were up 9.7% at 19,72 pence.
"It's mainly up on news of the banking facility helping guarantee their future, but the statement was generally more encouraging than people had expected," said one trader.
The company said the closure of 81 shops would lead to a greater-than-expected loss this year, though Chief Executive Chris Langley said the move should cut overheads by 15 million pounds ($30 million) a year.
He said the company should return to profit next year before restructuring costs.
Jessops intends to concentrate on online sales and the printing of pictures in-store, which it said are high margin areas. The firm currently makes 12% of its sales online and allows customers to order cameras or upload pictures on the Internet and collect them from its stores.
Its banking facility with HSBC has been increased by 4 million pounds to 66.5 million and extended until December, 2008, the firm said.
Jessops said 31 of the 81 stores to be closed are loss-making, 47 overlap too closely with nearby stores while three are being redeveloped. It rents the vast majority of its stores so is unable to get money by selling them.
It will keep 234 stores, it said, as it published the results of a strategic review.
"The board is confident that Jessops will deliver a significant turnaround in its financial performance," said newly appointed Executive Chairman David Adams in a statement.
Jessops expects its full-year pretax loss, before refinancing and restructuring, to be around 6.5 million pounds -- up from a previous forecast of 5 million pounds -- because of disruption and the loss of profit from some stores.
Jessops said 60 million pounds of the extended banking facility was already committed and the refinancing will lead to additional charges of 3 million pounds this financial year.
The company posted a pretax loss, excluding non-recurring items, of 8.5 million pounds, versus a profit of 5.1 million a year before, for the 26 weeks to April 1.
Jessops said like-for-like sales fell 12.9% and total sales declined 9.8% in the 12 weeks to June 17 because of shortages in key product lines caused by financial uncertainty.
This was because some suppliers held back, or delayed, on supplying some stock because of fears over Jessops' future.