Scotch & Soda lends 30 million euros to overcome the damage caused by the corona crisis. As a result of the pandemic, turnover fell by 12% in the past financial year and the Dutch fashion chain fell deep into the red.
Substantial write-down on goodwill
Fashion brand Scotch & Soda recently received two capital injections from its owner Sun Capital, worth 15 million euros in total. The clothing retailer also borrowed a further 15 million from the banks, using a support scheme provided by the Dutch government: the government guaranteed up to 80% of the amount borrowed in response to the corona crisis.
The Financieele Dagblad reports this on the basis of its annual report, as the chain’s broken financial year ended on 31 May. Strongly marked by the corona crisis, turnover fell by 12% in the past year to 290.6 million euros. The loss even increased tenfold, from 12.9 million euros in financial year 2018/2019 to 159.6 million euros now.
The loss is largely due to a 95 million euros write-down on the goodwill paid by Sun Capital on the acquisition of Scotch & Soda in 2011. Especially the wholesale and own retail activities suddenly lost value due to the corona crisis.
No redundancies or closures
Nevertheless, according to CFO Thomas Bervoets it will not come to a reorganisation. There will be no redundancies and shop closures appear not to be necessary either. Although Covid-19 will “certainly create headwinds in the future”, the company will be able to withstand thanks to this refinancing, Bervoets believes.
After all, the summer already brought a recovery, with sales in the first quarter (up to and including August) again approaching those of last year. This was partly thanks to e-commerce, as online sales doubled. The company also managed to reduce stocks. For the new season, Scotch & Soda did indeed buy much less stock.
Expansion plans again
Scotch & Soda even sees expansion potential. New stores have already opened in Maastricht, Bonn, Austin and New Jersey in recent months, and more will be opened in other markets where the brand can still grow. Bervoets is thinking of Germany and France. Today the brand has 249 own boutiques in 70 countries.
Paradoxically, this expansion should lead to cost reductions: the fashion retailer is trying to “compensate for a rent reduction in one store with the opening of a new Scotch & Soda with the same landlord”. The chain is currently negotiating lower rents with its store owners, having shared half of its loss with the landlords during the lockdown.
