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Internacionale – third time unlucky?

The Administration story so far…….A tale of two Pre-packs.....

As reported in May 2008:

Internacionale Limited, the company which operated value women’s fashion stores ‘Internacionale’, has gone into administration.

Prior to the administration, the company sold the Internacionale brand and stores, along with 31 of the 91 Au Naturale stores, to an unnamed investor, securing 1,350 jobs.

As reported in July 2013:

Women's fashion chain ‘Internacionale’ has been rescued from administration by a controversial pre-pack sale saving 1,550 jobs in 114 UK stores

The bargain retailer will continue operating 114 stores across the country, but 18 have shut.

The new business, International UK Ltd, has been bought by the previous owners for an undisclosed fee.

The new owners are former chief executive Raj Sehgal, managing director Naresh Abrol and former finance director William Milton. All three are expected to run the new company in the same positions.

Update the timeline to March 2014:

Administrators were appointed to Internacionale UK Limited on 28 February 2014.
Internacionale operates from 89 stores across the UK with approximately 1000 staff.

Are lessons being learned?

You cannot fairly criticise the attitude that a business as large as Internacionale, employing around 1000 people, should be capable of being rescued in some shape or form. You would think that there must be an element of value in the underlying business, the money already invested in the infrastructure, the property footprint, the supply chain, the volume of sales? But if a business model fails once, what is going to be different in the future? Is the underlying business actually so broken, it cannot be fixed?

A pre-pack sale in an administration can be used to ‘restructure finances’, or in other words write off debt to suppliers / landlords etc, but if it is not backed up with a serious change in direction for the business, is it just postponing the inevitable?

I would suggest that the first question to be asked should be; with approximately 100 stores and 1000 people, what could I sell at a sufficient margin, over the cost base, to achieve a sustainable return on the capital investment required?

Is the risk that with a pre-pack that it is too easy to ‘restructure the finances‘ without having to actually look at the business model and without a blank sheet of paper approach, the same sales volume x sales margin vs cost base issues are likely to continue?

The 2014 Administrators seem to have come to the conclusion that it will be third time unlucky for Internacionale. Despite having trailed the likely administration in the media in the preceding weeks, it does not look like a purchaser has thrown their hat in the ring…..

“Unfortunately, unless a willing purchaser for the business or store portfolio is forthcoming, it is inevitable that redundancies and store closures will become necessary as the administration process continues. The company and the administrators are making every effort to help staff through this difficult transition.”

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