Feb 15, 2022
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Mike Ashley surprised over Studio Retail collapse, race is on to protect jobs

Feb 15, 2022

The shock news that Studio Retail is to file for administration has put over a thousand jobs at risk and reportedly has also left major investor Mike Ashley – the boss of Frasers Group – mystified as to why and how it happened.

Studio Retail

The company's shares were suspended yesterday as it announced its plan to call in administrators after it failed to get a £25 million loan to see it through the current period. The company had said last month that it had a surplus stockholding and needed short-term finance while it sells the stock to customers.

Frasers Group is the biggest shareholder in the company with almost 30% and only increased its holding two weeks ago.

USDAW, the union that represents its staff is seeking urgent meetings with the management team and the administrators as it focuses on securing as many jobs as possible.

The company currently employs 1,400 people and was valued at £100 million before this latest crisis, although that was much lower than the value it had at certain points last year when trading looked to be going well.

Studio Retail is the third major investment that billionaire Mike Ashley has made that has gone wrong as he also lost £150 million when Debenhams went into administration, as well as losing his investment in Goals Soccer Centres.

Ashley had tried to acquire Studio Retail (formerly known as Findel) back in 2019 but later sold a chunk of shares to take his holding down to 27%. However, when the share price tumbled on a second profit warning a fortnight ago, he added an extra 1.75% to his holding.

Neither Frasers nor Ashley have officially commented but The Times quoted a source close to him saying: “He’s not happy . . . He doesn’t understand how they f***ed it up.”

His interest in the company has now led to speculation that he could try again to buy it in a rescue deal, or provide financing to keep it afloat as he had once wanted to do with Debenhams. Either way, it would mean Studio Retail having to accept that he would be in the driving seat and while the board rebuffed him in the past, the company may have little choice now.

Aside from the pandemic and supply chain issues that have caused its problems, the company does seem to have good prospects generally, particularly in the current environment where consumers are seeking budget goods as inflation soars. Studio Retail sells a wide variety of keenly-priced general merchandise, including both fashion and beauty. 

Only six months ago the firm had talked of becoming a £1 billion business. But assumptions about elevated online sales continuing post-pandemic seems to have led to it ordering too much, while slower sales and higher logistics costs left it without enough working capital.

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