Has the Vivarte Group been rescued?

French group Vivarte (André, La Halle, Kookai, Caroll, San Marina, Chevignon, Naf Naf, Besson) is going through a major crisis - one that has been going on since the start of this decade. Patrick Puy, President of the Group, has not beaten about the bush concerning the crisis: he is selling off the group, piece by piece. This strategy is in line with the wishes of the shareholders who are mostly investment funds.

Vivarte is currently undergoing a massive offloading and restructuring plan. André is set to be sold to Spartoo (the sale will be finalised in June) and Naf Naf has been acquired by Chinese group La Chapelle Fashion Co. which owns several womenswear fashion brands. (this sale should be finalised by mid April). These major brand sales have helped the Group report increased results for the first time in six years. However, the Group is still making losses: 305 million euros in 2017. The loss was 672 million in 2016.

In order to fulfill his mission, Patrick Puy is going to continue to apply his stratgegy which consists of rotating the Group’s brand portfolio. However, these changes will not take place without some hardship. For example, Puy had to take over the reins at André following the sudden departure of its Chairman and Managing Director, Pascal Poulain, who left the company suddenly at the beginning of March due to ‘personal reasons.’ “There is no one else left to direct André,” a union representative exclaimed. Employees have regularly shown their disquiet whilst the inter-union group at André, CFDT [Confédération française démocratique du travail, French Democratic Federation of Labour], CGT [Confédération Générale de Travail, General Confederation of Labour] and FO [Force Ouvrière, Workers’ Force], hold the Vivarte Group accountable for the current situation which André is in.

According to Patrick Puy, the Vivarte Group has been rescued. He is certain that the net result will be substantially positive in 2018 and that the residual debt will be much lower in 2019. At the same time, he has announced plans to invest 80 million euros in 2018. This does not necessarily mean an end to the sacrifices made by the Group. All the brands in the Group are currently in the red, so it appears to be that the sacrifices are being made by everyone: by the creditors who have agreed to waive 864 million euros of the debt through a restructuring agreement concluded in June 2016; and by the employees who are going to have to put up with an inevitable series of rumours concerning the closure of their stores. Vivarte is in fact making plans to close about 140 stores in its brands retail portfolio in France.

Cashiers are no longer allowed to apply automatic discounts

There are other somewhat unexpected victims: the customers. At least, that is what we have been led to believe from a single story published by the newspaper Le Monde, which spread like wildfire on the Internet over Easter weekend. The story goes that in mid March the commercial director of La Halle sent an email to his teams ordering them not to apply any of the reductions offered in-store to holders of the loyalty card. This card can be used to obtain an automatic discount of 20 percent when going making a purchase in-store for the fifth time. This story completely contradicts the objectives previously laid down for employees by the managers of the chain, which is consist in promoting customer loyalty. It is a quantified objective: two years ago, it was necessary to obtain a checkout throughout rate of 75 percent through its loyalty cardholders.

A new direction, which is rather bold, has been applied instead: the automatic customer reminder email has been cancelled. Cashiers no longer have to tell customers if they are entitled to the discount or not. But what happens if a customer asks about their discount? In case of this scenario, the management has given a directive to offer apologies and to apply the discount to which the customer has a right to, even several days later, provided that they still has their receipt.

In less than three years, La Halle has substantially reduced its fleet of stores. The result was the removal of 1,250 jobs in 2015 and 700 in 2017. Today in France, La Halle has 371 “Fashion and Accessories” stores and 500 La Halle “Shoes and Leather Goods” stores, with 8,000 employees. Last year, Vivarte indicated that it wished to re-position La Halle to offer a wider range of products at lower prices, aimed at families. It involved differentiating itself from H&M or Primark and putting an end to zig-zag strategies so as to make a clear offer to customers. The episode this weekend also had the merit of clarity.

Photo credit : Vivarte, dr