Paul: Fonehouse restructure

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Independent mobile retail really is struggling at the moment. JAG is being chased for VAT and having to cut costs dramatically and shut stores to save itself, Intek has cut costs at head office and let some store staff go, and now Fonehouse has put its trading company into administration, a move that is bound to fuel speculation it too is in trouble.

Fonehouse Holdings was the retailer’s main trading company and owned the leases to all of its stores at one time. It seems dramatic to dismantle this part of the business just to renegotiate rent on a few leases.

Fonehouse insists it is trading well and its franchise programme is proving a rousing success. However, its most recent accounts, to February 2008, state that Fonehouse Holdings turned over £12.7 million for the year prior but made a loss of £713,000 before tax. Trading for the past year is not available, but given the economic and general retail climates, it would be extraordinary if its 2008 losses did not run apace.

Shutting its own stores and reopening them as franchises shows it is looking to cut costs and reduce its exposure. Every retailer – from JAG to Carphone to the networks – is doing the same.

It seems like a desperate time, but Bayley has been working mobile retail for a long time and is clever. Fonehouse will do well through its franchise scheme. Bayley has shown JAG boss John George a way through.

 

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