Retrenchment not enough as the lights go out for Luminar

Britain’s leading operator of nightclubs has gone bust - in spectacular style. In the last year of trading, Luminar plc lost £200 million through its network of 75 nightclubs. The banks have finally pulled the plug and have appointed administrators to handle the closure/sale of the remaining business. Eleven clubs have already closed and buyers are being sought for the rest.

An interesting case study on several levels. Luminar has blamed its problems on the recession and claims young people are not spending as much money going out. With high fixed costs, that’s a recipe for disaster. There might be some evidence here in this BBC Newsbeat article which suggests some additional reasons for the failure of the business. For example, uncompetitive pricing of drinks; unattractive club decor & facilities.

As the administrators were appointed, Luminar had approximately £85m in net debt owed to Lloyds TSB, Barclays and Royal Bank of Scotland. Luminar had been experiencing declines in nightclub revenues for several years and had already been through a process of substantial retrenchment. The company was hit hard by the smoking ban and government licensing re-arrangements which meant pubs could extend their drinking hours beyond 11pm. Following the changes, Luminar cut the number of clubs it owned from 230 at the end of 2006 to 100 clubs two years later.