Greetings Direct bids goodbye

When Flying Brands acquired Greetings Direct in 2006, then-chief
executive Mark Dugdale stated that he liked that “it
generates substantial cash and is immediately earnings
enhancing”. Apparently it didn’t enhance earnings enough:
Flying Brands is shutting the continuity greetings-card business.

The parent company of Gardening Direct, Listen2Books and Flying
Flowers, Flying Brands had big plans for Greetings Direct. In
summer 2007 it tested the brand in Australia. The subsequent
launch, though deemed successful, took a toll on the company’s
bottom line. Customers requested more starter packs than
forecast, resulting in higher-than-expected start-up costs.

In April 2008, Flying Brands announced it was taking Greetings
Direct to the States. Despite the economic slowdown in the US,
Flying Brands said it was “convinced” by the
“excellent response levels” in Australia that it
could succeed there. But on 3rd July, Flying Brands revealed that
the test in the US had been “extremely disappointing”
and that not only was it pulling out of the US market but that it
had begun a “managed closure” for the next 12 months
of the brand in the UK and Australia as well, due to increased
bad debts and returns.

Flying Brands is taking a £11.5 million hit on the goodwill
and intangible assets of Greetings Direct as a result of the
failure in the US market. In addition, it is making provisions
for future losses and closure costs of some £1.7 million.
This is expected to reduce Flying Brands’ pretax profits by
£1.5 million for the current financial year.

The Greetings Direct failure has done nothing to silence rumours
that major shareholder West Coast Capital wants to buy Flying
Brands and delist it. From a high of 263.5p in July 2007, Flying
Brands’ share price has plummeted to just 49p in July 2008.


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