Debenhams rocked by the collapse of Patisserie Valerie as cafe chain closes outlets at the department store
The collapse of Patisserie Valerie has dealt a fresh blow to Debenhams as the cafe chain closed outlets at the department store.
Just hours after parent company Patisserie Holdings crashed into administration following an accounting scandal, the shutters came down on 71 cafes, with the loss of 920 jobs.
The closures included 27 Patisserie Valerie cafes, all 19 Druckers stores and 25 Patisserie Valerie concessions, including 17 in Debenhams, four in Next and four in service stations.
Patisserie Valerie has closed 17 of its concessions inside Debenhams stores following the collapse of the cafe chain
Analysts said the closures in Debenhams were a further blow to the struggling department store chain.
Russ Mould, investment director at AJ Bell, said: ‘What Debenhams has been trying to do is create an experience and be a one-stop shop where you can eat, drink and shop. If those concessions go then Debenhams has even more floorspace that isn’t earning any money.’
Patisserie Holdings plunged into administration this week after a £40million black hole was discovered in its accounts.
Administrators at KPMG said they will continue to trade the remaining 122 Patisserie Valerie stores as it seeks a buyer.
David Costley-Wood, partner at KPMG and joint administrator of Patisserie Holdings, said: ‘We have been pleased with the level of interest we have received and so remain hopeful of achieving a positive outcome.’
But more than 2,000 jobs remain at risk, on top of the 920 already lost. Chairman Luke Johnson, who owned 28.5 per cent of the firm, attempted to keep it running by plugging it will millions of pounds of his own money and seeking a bailout from investors.
But the firm collapsed after it was unable to strike a deal with lenders to extend a £9.7million loan agreement, meaning it could not afford to continue trading.
Patisserie Holdings and Johnson are now facing legal action from shareholders who are expected to be left with nothing.
Chris Boxall, co-founder of Fundamental Asset Management, which invested in Patisserie Valerie for clients, said: ‘What has he [Johnson] and the board been doing?
What questions were they asking at meetings, what things were they looking at, did they ever roll up their sleeves and have a look at the heart of the business, which you would expect from a so-called executive director which he was in this business.’
Debenhams, which declined to comment, is already battling to attract customers after plunging to the biggest loss in its 240-year-history, and is now looking to close as many as 90 of its 166 stores.
It is understood to be trying to find jobs in its stores for affected Patisserie Valerie concession staff.
Patisserie Valerie has also cancelled a tie-up with Sainsbury’s to sell its cakes in 70 stores.
Luke Johnson made £40m
Luke Johnson has taken £40million out of Patisserie Holdings since the company listed on the stock market five years ago.
The 56-year-old entrepreneur, who is chairman of the firm, and his wife sold £23million of shares when it listed in 2014.
The following year he sold £12.6million of shares.
He has also pocketed dividends of £3.75million and pay of £60,000 a year.
But he has ploughed money back into the firm.
Johnson lent it £13million, which he is unlikely to get back. And his stake of £166million is now likely to be worthless following its collapse.