When Darren Topp took over as chief executive of LK Bennett in 2016, his first move was to call the struggling fashion retailer’s founder and convince her to return.
Linda Bennett, who launched the luxury shoe and clothing brand in 1990, had sold up in 2008. In her absence the business stumbled.
“I called Linda and asked her to come back,” said Mr Topp, who previously ran department store BHS in the months before its failure.
A year later Ms Bennett, an English-Icelandic entrepreneur who had sold 70 per cent of LK Bennett to Phoenix Equity Partners and former Jimmy Choo chief, Robert Bensoussan, for about £70m, bought back her fashion empire for just £3m, three people with knowledge of the deal confirmed. Phoenix and Ms Bennett declined to comment on that valuation.
But her reappearance at LK Bennett has failed to revive the flagging business.
Hit by high rents on its large store estate and a prolonged UK retail spending downturn, the retailer known for popularising the kitten heel in the early 2000s crashed into administration on Thursday, putting at least 500 jobs at risk. Against a backdrop of clothing price deflation, LK Bennett’s £175 shoes and £225 dresses have attracted customers including the Duchess of Cambridge and Theresa May, the UK prime minister — but have been beyond the reach of many less well-heeled shoppers.
“The volume of sales required to make those sites economically viable was never possible at the prices LK Bennett has been pitched at,” said Richard Hyman, an independent retail expert.
He added, in an assertion shared by several current and former senior employees who spoke on condition of anonymity, that the retailer’s high-priced clothing did not appear suitably distinct from fashions sold by less expensive rivals, such as Reiss, Phase 8 and Hobbs.
“I would estimate that LK Bennett has been on sale for at least half of each season over the past three to five years,” Mr Hyman said. “So they’ve obviously priced it wrong, and the market has told them this.”
After LK Bennett lost £48m in 2017, Ms Bennett made £11m of her own money available to keep the business going. Its next quarterly rent bill is due on the last Friday of this month, while a loan repayment is due in April, Companies House filings showed.
LK Bennett had about 90 stores, mostly in Britain, when the founder ceded control, shortly before the financial crisis hit. Many of its shops were on 10 to 15-year leases, signed in a period of high consumer spending, a person who worked in a senior role at the company at the time said. “Try as we might, we just could not get out of the really expensive ones,” this person added.
Between 2008 and 2016 LK Bennett went through a tumultuous period that involved three chief executives. Mr Bensoussan and Didier Drouet, a former Pucci chief executive who ran LK Bennett for two of those years, were at loggerheads. The relationship between Mr Bensoussan and Ms Bennett was also fractious, with the founder calling on lawyers to deal with equity ownership issues, according to people with direct knowledge of the situation.
Under Phoenix and Mr Bensoussan, LK Bennett initially did well. In 2011, its sales were boosted by sightings of the Duchess of Cambridge wearing its nude “sledge” heels, a design classic developed by Mr Bensoussan, second-hand pairs of which still command £100 on eBay. The new owners expanded the business in Britain and into North America.
But by 2012, cracks in the business had started to appear. LK Bennett’s operating profits — a key performance metric for private equity-owned businesses — slid from £9m to £3m between 2012 and 2014, as full-price sales fell.
Mr Drouet blamed the weakening performance on prices being too high. “That pair of shoes Kate wore, I think it went up from £140 to £190 within three or four seasons,” he said.
He claimed LK Bennett produced too many of the style for the number of people that could afford them. While they were priced to sell at an 80 per cent gross margin, four out of 10 pairs were sold at a discount.
Mr Bensoussan, who fired Mr Drouet in 2014, said he considered that the chief executive had not managed stock or working capital well.
By September 2016, LK Bennett had been lossmaking for two years and Mr Bensoussan had resigned as a director, making way for Mr Topp.
Several people who know Ms Bennett personally suggested in interviews with the Financial Times that she might buy the best parts of the business out of administration, while shedding unprofitable stores, in what is known as a pre-pack insolvency. Ms Bennett declined to comment.
LK Bennett had 200 stores and branded concessions, the company said before it went into administration.
As the retailer’s financial troubles mounted, its latest styles were still being praised. Red magazine, a title aimed at middle-class British women, pronounced in its latest issue that ranges overseen by Ms Bennett showed the retailer had “got its groove back” and recommended readers buy its candy-coloured hand-crocheted bags with marble clasps.
But unless a new owner can be found for the chain — or Ms Bennett strikes a deal for a pre-pack administration — these ranges may be among LK Bennett’s last.
“Selling dresses to duchesses gets you some great PR,” Mr Hyman said. “But that does not move the dial when you have too many stores and too high prices.”
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