High Streets Initiative · 23 January 2019

Patisserie Valerie: How fraud brought down a high street veteran

Patisserie Valerie
The chain first opened in 1926
As Patisserie Valerie enters administration with heavy store closures and redundancies incoming, Business Advice looks at what went wrong for the caf.

The caf? chain, which opened in Soho in 1926 and had eight stores before entrepreneur Luke Johnson’s Risk Capital Partners bought a majority stake in 2006. By 2014, Patisserie Valerie was floated on the AIM stock market for smaller firms, with 191 stores open as of 2019.

As Patisserie Value fell into administration this week, administrator KPMG confirmed that 70 outlets will close immediately, with the remaining 121 left open while the search for a buyer begins.

The crisis began in October 2018 when Patisserie Valerie revealed ‘significant, and potentially fraudulent accounting regularities. Three months later, the company released a statement confirming it could not afford to pay its debts.

KPMG has already stated that ‘significant? redundancies are to come, while Johnson, the chain’s chairman and chief stakeholder, has held talks with banks for a cash lifeline to pay staff.

As the caf? follows Debenhams, Toys R Us and House of Fraser as the latest big name facing high street extinction, we asked a number of retail and insolvency experts where Patisserie Valerie went wrong, and whether there are any lessons for independent caf’s.

What went wrong??

Gavinpearson, partner and head of forensic accounting at business advisory firm Quantuma, explains that the fraud at Patisserie Valerie was “so extensive”, with historic profits overstated, that the company was forced to hand the keys to administrators.

“It indicates that the underlying business was far less profitable and successful than had been assumed by stakeholders, ” he added.

Outlining just how extensive the accounts fraud was, Pearson said that even after three months of investigation, “the true position has still not been established”.

in particular, the reference to ‘thousands of false entries’ suggests a long, complex and well-disguised fraud. The fact that the cash flow and profitability is now likely to be below that announced on 12 October suggests that the position is likely to be worse than was anticipated when investors determined to inject new funds into the company following identification of the fraud.”

it is also interesting to note that KPMG has been hired to carry out a review of all options available, which may suggest that the extent of the fraud may continue to threaten the future viability of the company.This is likely to be of significant concern to stakeholders in the business, who it appears will need to wait some time to find out exactly what has occurred.

this update on the extent and impact of the fraud may also be of particular interest to those investigating Grant Thornton’s historic role as auditor of Patisserie Valerie.



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Praseeda Nair is an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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