Eason’s restructuring depends on property market

These are interesting times for Irish books retailer Eason, which this week asked the High Court to formally approve its plan to pay a €60 million special dividend to shareholders.

The grand old retailer’s plan is to free up close to €100 million in capital by completing the sell-off of a 13-strong portfolio of properties, including some of its own stores that would be sold on a sale-leaseback basis.

If approved by the court, the scheme, devised by chairman David Dilger and managing director Liam Hanly, would see it reduce its share capital to return the bulk of the cash raised to its 220 shareholders, with the excess used to recapitalise the carved-out retail trading division.

The proposal has already been approved by its investors, who agreed with management’s argument that the business is over-capitalised relative to its size.

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Shareholders in Eason in reality have the value of their investment tied up, not in books and stationery but rather in bricks and mortar. It makes sense to decouple the retailer’s balance sheet from the vagaries of the property market.

It is those property market vagaries, however, that could determine the ultimate success or otherwise of the restructuring plan, provided the scheme ultimately receives the court’s approval.

Severe pressure

Just as these are interesting times for Eason, so too are they for the retail property sector. The growth in online sales has put the traditional retail market under severe pressure, booksellers more than most.

Disposable income and consumer confidence are flying high, but traditional retail sales are failing to keep track as sales from shops are leaked to foreign websites, such as Amazon.

This makes the outlook for the retail property sector more uncertain than it would otherwise be, with obvious knock-on effects for the Eason plan, whose success will revolve around achieving the best price possible for those properties it has left to sell, including its O’Connell Street flagship outlet. It has already sold its warehouse.

The shift to online has done much to shape Eason over the past decade. The indirect impact of the shift to online on retail property prices could do much to shape its future.