Restructuring specialist plots turnaround of HPJ Jewellers

Restructuring specialist Gordon Brothers has acquired struggling jewellery chain HPJ Jewellers and intends to turn around the business.

Administration is possible as part of the process and KPMG is understood to be on standby for that eventuality.

Gordon Brothers bought the retailer, which is on course to make losses of about £5m this year, for an undisclosed sum on December 15 and a notice of intention to appoint an administrator was filed on December 23.

Difficult trading in the run-up to Christmas is thought to have pushed HPJ to the brink and a source close to the retailer said sales for the period were “significantly below forecast”.

It is understood a proportion of HPJ’s 70 stores are loss-making even before rent is paid and some are expected to be closed. The source said: “The business is not capable of continuing in its current form.” In its last financial year, ending May 2, 2009, the jeweller posted a pre-tax loss of £2.6m.

Gordon Brothers is understood to be in discussions with the landlords of HPJ’s stores to renegotiate rents. Decisions are expected “in a matter of days” the source said.

Assuming rent reductions are won, the restructuring specialist believes a viable business will emerge. Gordon Brothers chief operating officer Malcolm MacAulay and investment director Fraser Pearce have been appointed as directors of HPJ. The management team is thought still to be in place.

The jeweller’s plea for distress rent reductions is said by landlords not to be symptomatic of a wider retail trend, although one source said under-pressure sportswear retailer JJB Sports hopes to make similar savings.

One big landlord said: “At the moment we’re not seeing it [a trend of retailers wanting to renegotiate leases] but we’re all aware of the challenges facing the sector so it’s something we can’t rule out.”