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Begg Shoes - Business Update 3rd April 2020

This summary has been published in order to raise awareness of the specific challenges faced by this independent, family run business and help to inform public policy with regards vital government support measures. 

The company is experiencing the most serious threat to its survival in its 154-year history. The Begg family are doing everything possible to ensure the long term survival of this highly regarded independent business and continued employment for all its staff.

All employees and customers of Begg Shoes have been incredibly supportive of the family and the business during very frightening and uncertain times for all.

It is hoped that Government policy and the challenging nature of its implementation (at this time) may be altered to assist businesses like Begg Shoes, and all of its employees.

 

Seasonal Cash Flow Crisis

Store closures have resulted in a year-on-year decline in sales of over 90% at the point of this update. Store sales represent the vast majority of income for Begg Shoes.

Cash flow pressures have been particularly acute due to the timing of store closure. Store locations rely heavily on tourism-driven footfall in Spring and Summer trading. 

This catastrophic event has immediately followed massive seasonal cash outflows, purchasing the largest ever seasonal range of stock, as well as settling substantial VAT and debt obligations pre-crisis.

Online sales have offered a lifeline however remain far from sufficient to sustain the entire business. During March an unprecedented giveaway of 50,000 £10 discount vouchers was launched to Loyalty Customers, to encourage vital sales. 

The business holds buildings, stock and fixtures of value.  However, cash is essential to pay wages, suppliers and other obligations but is incredibly short at this time.

 

Current Government Assistance

Government assistance has, as of 3rd April, not resulted in any cash inflows to the company. 

The company believe that the UK and Scottish Government should attempt to address apparent oversights in the design of current measures and review eligibility for grant schemes, for example.

The UK Government Employee Protection Scheme appears to be the most valuable support currently on offer (80% of furloughed staff wages reimbursed).

Currently, it is understood that scheme constitutes reimbursement (not funding for) wage costs. The current understanding is that the re-imbursement will be made at the end of May.  This creates a significant cash flow demand for the business which will require further loan finance. 

A Scottish Government initiative to offer small retail, hospitality and leisure businesses a £25,000 grant per property is notably limited to just one property per business. With nine locations this does not constitute a meaningful cashflow benefit to Begg Shoes.  Indeed this grant represents less than 1% of the annual overheads of the company, and is equivalent to just 3 days worth of average running cash outlays. This grant must be re-assessed by the government if it is to become any more than a political soundbite that suggests they are "helping" small businesses.

The accessibility of debt finance from banks has been well publicised.  The reality of debt finance from banks is that it may require personal guarantees and will come at an extremely high cost over the long term.

The directors of Begg Shoes have actively lobbied local Members of Parliament, local B.I.D. organisation as well as contacting Business Gateway as well as various media sources to highlight these issues.

 

Impact On Begg Shoes Employees

The severity of cashflow constraints is such that resources must be directed to support continuing staff and critical suppliers, to ensure immediate continuity and survival of the business.

Notwithstanding the business having to temporarily close its stores and experience an unprecedented decrease in sales, Begg Shoes has retained 100% of staff on active working roles or paid furlough.

Retained staff include all permanent contracted and all casual workers.

The family have taken a 75% cut in salary and at present are not able to obtain any financial support from the Government.

Unfortunately, the current HMRC reimbursement arrangements for furloughed staff, place a very significant cash flow pressure on the business which must fund and reclaim cash outflows (likely at the end of May). It is hoped this policy can be adjusted to fund businesses in advance.

At the end of February 2020, there were 44 employees of Begg stores, with an average length of service of over 6 years. At this stage, 41 of ‘pre-crisis’ employees have been retained on payroll by the business.

At this time, there are three individuals who have not been re-employed having been made redundant prior to Government interventions. Contrary to widely reported opinion, re-hiring under this scheme carries significant costs and risks to the business under current regulations, as well as added cashflow pressures at a time when there is no free cashflow.

The business continues to lobby for changes to policy implementation that will in turn help current and former employees.

 

Debt Finance & Long Term Funding

Loan finance is in the process of being secured to finance the payment of staff wages and critical suppliers at the end of April. 

It is anticipated that the economic impact will extend well in to 2021 if not beyond.

The directors of Begg Shoes recognise that this will result in very substantial financial losses for the company, which will rely heavily on personal savings and debt to survive the crisis.

The company is having to approach loan facilities with extreme caution while cash inflows are so limited. It is known that unsustainable levels of debt will cause total business failure in the future and this must be avoided.

 

Survival Measures

Cost cutting within the supply chain, including all non-essential services has become an urgent necessity for management of the business.

The company has been appealing for rent holidays, supply cancellations, fee waivers, discounts or payment deferrals wherever possible from suppliers.

While some vendors have been exceptionally supportive, most have declined to assist the business at this time and there have been a number of very disappointing outcomes so far.

Begg Shoes directors are continuing to consult with all vendors and hopes to resolve for positive outcomes and lasting relationships with each of their suppliers, landlords and vendors. 

 

Begg Shoes Company Bio


Begg Shoes is a shoe retail company based in the North of Scotland serving customers locally through its stores and worldwide through its website. A small, independent business, Begg Shoes is run day to day by Garek, Fiona and their sons Donald and Gaven, who are the sixth generation of the Begg family to join the family trade.

Begg Shoes was established in 1866 and has over 150 years of footwear industry experience. Expert customer service is the hallmark of the business and our instore teams boast an average of over 6 years working experience with us, and all the helpful knowledge that brings. 

There are nine Begg Shoes stores based in Scotland which offer expert shoe fitting advice. Our independent mission is to provide excellent overall customer experiences, with a uniquely selected range of fashion-led, high-quality brands paired with our expert advisory service and aftercare.

Staff offer a unique and very friendly environment, where customers can find all of the advantages of online retail working in harmony with traditional, instore customer service.

 

Contact

Please contact info@beggshoes.com while stores are closed for any enquiries.