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Swoon Future Saved In Pre-Pack Deal With Administrators

Interview with Andrew Cave, Telegraph and Forbes Contributor in an extended version of a story that appeared in the Telegraph.

Online furniture retailer Swoon has become the latest retailer to enter a pre-pack administration as pressure in the sector shows no signs of abating.

The company, which has been trading since 2012, has been bought from administrators KPMG by its co-founders Brian Harrison and Debbie Williamson, who have remortgaged their homes and used their savings to take full control. All staff are being given a stake in the new company as appreciation for their loyalty and commitment.

The new owners say 80% of jobs at the company, which now employs 24 people, have been saved and all customer orders will be fulfilled without delay. Over the past few years, the workforce has come down from a peak of about 75. The pre-pack arrangement follows a sale process run by KPMG, which was unsuccessful in finding a buyer.

Swoon made a loss of £8.7m last year and is on course to make a loss of £2.5m this year. However, overheads have been cut from £7m in 2018 to £1.7m and the company aims to make a profit of £1m next year, when revenues of £11m are expected, compared to £20m in 2018.

Formed as a digital brand aiming to make design-led furniture affordable, Swoon aims to revolutionise the retail sector, challenging its conventional mindset and seeking to minimise its main risks of unsuccessful design bets, overstocking and delivery failure. It raised £4m in 2014 from investors including venture capital groups Index Ventures, and Octopus Ventures.

Since then, the company has doubled revenue and quadrupled profits margins. However, it was hit by a sharp dip in retail confidence following well-publicised problems at department stores group Debenhams, internet retailer ASOS and uncertainty over Brexit.

Brian, a former chief executive of telephone directory enquiries group, The Number 118118, and daily deals business, KGB Deals and Debbie, a former head of digital product development at Telegraph Media Group, have brought the business into profitability after a year of rigorous cost reduction.

Brian says he is excited about the future of the business which broke even in November and will make a profit this month. He says partnerships with retailers will be streamlined to reflect the most successful associations, with arrangements with John Lewis and Shop Direct being retained.

The new company is expecting to agree terms with 95% of its supplier base: “This is the best deal for suppliers of the business, the vast majority of whom will keep working with the company under its new structure.” says Brian.

“Swoon’s business model is future and competition-proofed. It delivers scale and simultaneously drives margin improvements, whilst being extremely hard to replicate. The reason we have been able to do this acquisition is that we have fundamentally made the business profitable.”