Perhaps Patisserie Valerie Never Did Make A Profit At All?

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Patisserie Valerie has just gone bust as it was long possible it would do. The particular reason is that the banks wouldn’t extend facilities, that is, they’d rather like their money back instead of waiting to see how things turned out. Standing behind that is that little problem with someone, somewhere, fiddling the books. For years. Instead of having cash in the bank it had secret overdrafts and mountains, veritable Himalayan ranges, of unpaid invoices.

All of which raised the interesting question we’ve mentioned before. Did Patisserie Valerie ever in fact make a profit? For if it didn’t then there’s no good reason for it to survive or even exist, is there?

Patisserie Valerie has collapsed into administration, putting more than 3,000 jobs at risk, after failing to secure a financial lifeline from its banks. About 70 of the cafe group’s nearly 200 stores and concessions will close immediately, with the loss of about 900 jobs. Patisserie Holdings, the parent company that also owns the Druckers Vienna Patisserie, Philpotts, Baker & Spice and Flour Power City brands, has been in crisis since October, when a £40m black hole in its finances was blamed on “potentially fraudulent” accounting irregularities.

As we’ve pointed out:

“Luke Johnson’s Patisserie Valerie isn’t having an easy time of it. They thought they were sitting on a cash pile of near £30 million and they weren’t, they really weren’t. They weren’t paying their bills – landlords were trying to take back shops – and HMRC was trying to wind the company up. Not only that there were overdrafts management didn’t know about meaning that rather than £30 big up they were – before those various creditors – £10 million down.”

The implication of all that possibly being:

“We are not privy to any special or new information here but we can indeed still form a view. It’s entirely possible that the chain just never was making a profit. Isn’t now either. And if that’s true then there’s no value to it either. Our suspicion is that this is the real situation too.”

If that’s so then:

“It’s possible – unlikely perhaps, but possible – that there simply aren’t and haven’t been economic profits at Patisserie Valerie. At which point, what value in it surviving?”

For if an organisation doesn’t produce an economic surplus then what’s the point of having it?