The high street has been rocked by a fresh wave of store closures and job losses as household names including Carpetright, Fenwicks and Poundworld announced major restructuring programmes.
At a meeting in London on Thursday, Carpetright was able to avoid tipping into administration after landlords backed a company voluntary arrangement (CVA) that will allow it to close 92 stores with the loss of 300 jobs.
Struggling retailers, including New Look and Toys R Us, have turned to the insolvency procedure to shed loss-making stores and negotiate cheaper rents on other outlets.
No sooner was the ink dry on Carpetright’s plan than it emerged that struggling discount retailer Poundworld wants to use a CVA to shed 100 stores, a move that will cause up to 1,500 job losses. Poundworld, which started in 1974 as a market stall in Wakefield in West Yorkshire, has expanded to become a chain of 355 stores with 5,500 employees.
Poundworld was acquired by American private equity firm TPG Capital in a £150m deal in 2015. However, it has struggled in the wake of the Brexit blow to sterling that pushed up the cost of imported goods. Last month, TPG used a CVA to close nearly 100 branches of its ailing restaurant chain Prezzo.
Hopes of a high street recovery from trading hit by poor weather were dashed after the CBI reported another weak month of sales for retailers. In its monthly distributive trades survey, the CBI said 31% of firms had reported sales growth over the year to April; 33% reported a fall. The balance of -2% points was much weaker than the +16% point rise anticipated when retailers were questioned last month.
The tough trading conditions faced by retailers in March were underlined by the experience of Homebase where sales plummeted 20% as the “beast from the east” cold weather added to the woes of the Australian-owned DIY chain.
High-end retailers are not immune; Robbie Feather, the chief executive of upmarket department store chain Fenwick, warned that a “significant number” of of its 2,200 jobs were at risk as part of a plan to modernise the 136-year old family business.
“These proposals are part of a broader strategy to modernise the business and to invest in Fenwick’s multichannel offer and its flagship Newcastle store [which is getting a £30m refit],” said the company. “We are consulting all colleagues about proposed structural changes and it is only at the end of this process that we can confirm how many posts will be made redundant.”
After winning the backing of landlords, Carpetright will begin talking to shareholders as it looks to raise £60m to reduce debt and cover the cost of the restructuring.
“Landlords have taken the view that a recapitalised market leader is better than no market leader,” said its chief executive, Wilf Walsh, speaking after the creditor meeting. “The 25-year leases, with upward only rent reviews, signed in nineties and noughties have run out of road.”