forward at the sharp end. That is what he likes doing and what he does
best.’
Ratners’ offer document^25 and the sale of Watches of Switzerland to
Asprey in June pleased bankers but were less well received by analysts. This
25-branch chain, dealing particularly with quality Swiss brands such as
Rolex, Patek Philipp, Audemars Piaget and Cartier, had generated £22
million of turnover the previous year and profit of £0.9 million before excep-
tionals and tax. Its price of £23 million compared with £50 million sought
only five months earlier, though it was thought to have remained relatively
immune to the IOD speech. Ratners said that the stores had limited synergy
with the core business and it was going to ‘the right sort of home’.
Elsewhere it was rumoured^26 that the Bank of England was putting pres-
sure on Ratners’ 25 bankers to take an enlightened attitude and extend
their £500 million lending facilities to the struggling jewellery group to
avoid a high-profile collapse. By 22 August 1992 agreement had been
reached, with more stringent covenants and higher interest rates. Some of
the debt was now secured. The shares fell back to 11.5p.
Published annual results showed group sales up at £1.13 billion, mainly
due to the inclusion of a full year of Kays’ turnover. Apart from slight
increases at Kays and Salisbury, all other chains suffered falls in turnover,
with Ratners down 24 per cent on a comparable basis. Pre-Christmas price
cutting had cost an estimated £36 million, whilst operating costs had risen
by an extra £113 million. Pre-tax losses were £122 million. Total debt had
risen to £480 million, offset by cash of £257 million and shareholder funds
of £303 million. James McAdam commented that ‘adverse publicity’ had
affected sales in Ratners’ stores, though this was offset by shoppers avoid-
ing Ratners’ shops ‘only to go into one of the group’s other stores’.
He reiterated his comment^27 that the future of Gerald Ratner was not in
doubt, insisting that the four-strong executive committee was united in its
mission. ‘People say, “My God, is there a lot of blood on the walls in rela-
tion to that?” The answer is that everybody has understood what has to be
done and the whole thing has the commitment of the key management. We
have not had problems.’ David Wellings, managing director of the
Cadbury Schweppes confectionery business, replaced the retiring Sir
Victor Garland as a non-executive director, contributing retailing experi-
ence from sweets, which shared similar seasonality and impulse buying
characteristics. He had known James McAdam since the mid-1980s.
Gerald Ratner, himself, announced further details of the rationalization
programme. Blaming the recession, he said that they could no longer be a
sales-led organization, and would start to concentrate on profits. Nick
Bubb, retail analyst at Morgan Stanley, was quoted^28 as being amazed: ‘I
never thought I’d see the day when Gerald Ratner would admit that the
old approach was dead.’ 180 stores in the UK and 150 stores in the US were
to be closed with the probable loss of 1000 jobs, and they would reduce
264 Relationship Marketing