Abokado Suffers 'Sophisticated' Fraud and Sharp Fall in Sales
King Street store under threat as company launches insolvency procedure
King Street 'healthy eating' store Abokado could be under threat after the company suffered a ‘sophisticated’ banking fraud and sharp reduction in sales.
These factors have forced Abokado to launch a company voluntary arrangement (CVA). This is an insolvency procedure which allows companies to remain trading by restructuring their businesses, and has been used by a record number of retaurant chains including Carluccio's, Jamie's Italian, Byron and Prezzo.
All these companies were forced to cut costs by closing some branches, and Abokado is expected to follow suit, shutting underperforming stores across London.
The company stated: "The challenges facing the restaurant sector are well documented including raw material and labour cost pressures, property cost increases, intense competition as well as the impact of weakening consumer confidence.
"The directors implemented numerous measures across 2016 and 2017 to mitigate these, resulting in the company delivering record profits during the year to March 2018. Abokado continued to perform well in the year to 31 March 2019, with like-for-like sales up 3% for the year as a whole.
"However, the company experienced a softening in sales from autumn 2018 onwards. This adverse sales trend accelerated through 2019, driven by a sharp reduction in sales volumes.
" Furthermore, in July the business suffered a significant sophisticated online banking fraud, which materially impacted working capital and compounded the trading issues. The fraud is subject to investigation by the relevant authorities but the directors consider it unlikely there will be any recovery.
" The directors have undertaken a number of measures across 2019 to improve performance against the prevailing headwinds, comprising further cost reduction and margin improvement plans. While the core Abokado estate continues to trade well, a number of underperforming sites threaten the survival of the whole business.
"The proposed CVA is designed to mitigate and/or remove these factors to underpin the short, medium and long-term viability of Abokado providing the best outcome for our creditors, suppliers, customers and employees. The directors wholeheartedly recommend all stakeholders vote in its favour."
Chief executive Mark Lilley, pictured above with wife and co-founder Lindsay, added: "Over the past three years my team have proactively addressed the market conditions and we considered Abokado was in a good position. The market dynamics during 2019 were unanticipated and their impact has been further compounded by the recent fraud.
"The proposed CVA will put Abokado in the best possible position to move forward in an uncertain environment. It will allow my excellent management team to continue pursuing our vision of bringing freshly made, Pacific-inspired food to more people."
Abokado is not the first chain to suffer accounting fraud over the last year - a large scale fraud led to the closure of Patisserie Valerie's King Street store and the collapse of the company.
September 12, 2019