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Fashion United
3 days ago
- Business
- Fashion United
Restructuring retail: Lifeline or legalised pause button?
Store closures, rent cuts, and creditor cramming – restructuring plans have become a familiar headline in UK retail. But beyond the legal jargon, questions are mounting: Are these plans really turning businesses around, or simply buying time? And is the sector offloading its problems onto landlords, rather than fixing what is broken? River Island is the latest high street name to turn to a court-approved restructuring plan, echoing a broader trend in how UK businesses handle financial distress. It marks a shift away from company voluntary arrangements (CVAs), which had been popular prior to 2020 and used by retailers to restructure their debts and limit commercial rent liabilities. However, as landlords grew increasingly hostile to CVAs, often challenging them in court, they began to fall out of favour. Restructuring plans, introduced in 2020 under the Corporate Insolvency and Governance Act, intended to fill that gap. Aligning more closely with the US' Chapter 11 process, they allow companies to reorganise debt under court supervision, and bind dissenting creditors if the court deems the plan as fair. Their introduction was welcomed, particularly in the wake of the pandemic, which had caused widespread financial strain on the retail sector. It answered the call for a fast-track rescue tool for viable businesses experiencing short-term liquidity problems. Landlord mistrust and job losses contrast legal stability and court assessment Still, concerns over their use are growing, particularly in regards to the fairness of the tool. In River Island's case, creditors, including landlords, had initially rejected the proposals, which included the closing of 33 stores and rent cuts across an additional 71. One is even said to have sought legal advice ahead of the court hearing, as a similar process underway at Poundland also presented cause for concern. No formal objections were raised in court, however, and the plan was approved. While indeed the process of a restructuring plan may seem unfair to some, there are benefits to their implementation. According to Lucy Trott, managing associate at Stevens & Bolton, the court plays a key role in assessing whether creditors are better off under the plan than if the company were liquidated. 'Where dissenting creditors are being 'crammed down', their position is actually improved – or at least not worsened – by the plan,' she said. Yet, as restructurings may offer a legal route to survival, it often leaves behind a trail of job losses and empty shop fronts. Poundland, whose restructuring plan is due in court soon, has already confirmed 68 store closures, with up to 80 more at risk. River Island, meanwhile, has already embarked on a redundancy programme across the business, potentially bringing job losses to 200 by the end of the year. Trade bodies like the British Independent Retailers Association (Bira) have sounded the alarm. 'We need urgent support for high street businesses,' said CEO Andrew Goodacre, urging the government to cut business rates and tackle cheap import loopholes. He stated: 'It's deeply saddening to see long-standing high street chains announcing significant profit reductions and facing existential threats. These developments provide yet more examples, if they were needed, of the urgent need to support high street businesses across Britain.' This sense of urgency reaffirms a need for swift action, though there is a worry that many of these plans offer short-term relief, not long-term solutions. Trott notes that for some, however, a restructuring plan is just one piece of the puzzle to initiate a wider restructuring. She added: 'Often a restructuring plan will propose the reduction of commercial rents while the company seeks to reduce its physical footprint, thus reducing its liabilities in the longer term and creating a leaner, but hopefully more profitable, business model going forward. As to whether the plan will fix long-term business problems – the devil is in the details.' The need for a wider perspective to mitigate long-term problems Chris Bowers, head of insolvency at Forbes Solicitors, agrees. He warns that without reconnecting with shoppers, these plans risk becoming a 'sticking plaster' that simply prolong an inevitable collapse in the near future. He continued: 'Restructuring plans concentrate on shutting stores and cutting rents. Such moves support liquidity but stop short of addressing declining sales. River Island's most recent accounts show turnover fell more than 19 percent. Any form of long-term survival needs to reconnect the retailer with consumers to boost revenues, and quickly.' For Bowers, River Island's situation is reminiscent of the demise of Arcadia Group, which restructured under a CVA in 2019 but entered administration just over a year later. 'Arcadia's restructuring focused on cutting the costs of brick-and-mortar stores, which wasn't enough to fix problems with declining sales,' Bowers said. 'River Island executives could learn from this by quickly moving from cost-cutting measures to now finding relevance with shoppers to drive vital sales.' There are signs of change, however. Upon its acquisition of Poundland, Gordon Brothers set out to realign the business with consumer demand. Next to store closures, the US firm detailed plans to wind back certain categories, like frozen foods, and invest more in womenswear and seasonal products. Both divisions are now expected to return under the guidance of an in-house team following the restructuring. The details of River Island's future plans are yet to be publicly shared, and the retailer's management team have previously shared that it had been struggling to retain relevance among its consumers as competition heightened. Trott noted, however, that while restructuring plans are focused on finances, as part of the process, the company will likely have a turnaround strategy to improve sales which are not captured in the plan, but instead move behind the scenes. Other retailers are also adapting. New Look has pledged digital investments after liquidating its Irish arm earlier this year, while Quiz offloaded part of its business to protect retail jobs after closing stores following its descent into administration. Where River Island goes next has not been made public, but the company has admitted it's struggling to compete with fast-moving, low-price players like Shein and Temu. 'It follows that the recovery plans for the company is likely to involve a greater push towards online sales, which will enable the business to adapt more quickly to changing trends, but this is not a feature of the restructuring plan itself that would have been publicised as part of the court process,' she noted. Restructuring plans are not a silver bullet, nor are they inherently flawed. They offer vital breathing space and legal-backing, but risk becoming a go-to fix for deeper issues, from changing shopping habits to digital underinvestment. For the high street to truly recover, cost-cutting needs to be matched with innovation, with a renewed focus on what today's consumer actually wants. Read more:
Scottish Sun
29-06-2025
- Business
- Scottish Sun
The Original Factory Shop to shut more stores starting in weeks as up to 50% closing down sales launched
We reveal further details on a major restructuring taking place at The Original Factory Shop below SHUTTERS DOWN The Original Factory Shop to shut more stores starting in weeks as up to 50% closing down sales launched Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) THE Original Factory Shop (TOFS) is shutting more stores starting in weeks with up to 50% off closing down sales launched. The homeware, electricals and fashion retailer is pulling down the shutters on three branches in England and Wales. Sign up for Scottish Sun newsletter Sign up 1 Three more TOFS shops are shutting Credit: Alamy A shop in Ashbourne, Derbyshire has launched a giant closing down sale with up to 50% off stock. A second location in Bridlington, East Riding of Yorkshire, is shutting, as well as a third in Caernarfon, in Gwynedd, Wales. The Caernarfon store has also launched a clearance sale to shift any remaining stock. It is not clear what date the Ashbourne store will shut while it is understood the Bridlington and Caernarfon sites will close on July 20. Shoppers have reacted with sadness on Facebook after finding out the three stores will shut for good. One, commenting on the Bridlington closure, said: "God it's not been open long getting so sick of things closing down." A shopper discussing the Ashbourne store closure added: "What a shame, such value for money and a good range of merchandise." The latest round of closures comes after TOFS closed eight branches across England and Scotland just yesterday. Shops in Pershore, Shaftesbury, Kidwelly, Arbroath, Normanton, Chester Le Street, Peterhead and Perth all closed for good. These closures came after a branch in Milford Haven, Pembrokeshire, shut on Thursday (June 26). Britain's retail apocalypse: why your favourite stores KEEP closing down Four more stores in Staveley, Cupar (Fife), Middlewich and Heswall are set to close later this year as well. The Sun asked TOFS to comment. TOFS RESTRUCTURING EFFORT Private equity firm Modella bought The Original Factory Shop back in February and has since launched a restructuring effort to renegotiate rents at 88 stores. Modella is known for picking up struggling retailers, having also recently acquired Hobbycraft and WHSmith's high street shops. At the end of April, Modella drew up plans to initiate a company voluntary arrangement (CVA) for TOFS. Companies often use CVAs to prevent insolvency, which could otherwise result in store closures or the collapse of the entire business. They allow firms to explore different strategies such as negotiating reduced rent rates with landlords. TOFS previously told The Press and Journal that a "number of loss-making stores will have to close" as part of the restructuring. However, it is not clear if the three branches in Ashbourne, Bridlington and Caernarfon are closing as part of this restructuring effort. HIGH STREET STRUGGLES TOFS is not the only retailer struggling on the high street amid the surge of online shopping and weaker household budgets. Hobbycraft shut nine stores on June 21 after launching closing down sales. Dobbies has also closed a slew of garden centres across the UK this year. The Centre for Retail Research is predicting more than 17,000 retail shops will shut in 2025 too. The centre has forecast a rise in closures after a hike to employer National Insurance contributions and the national minimum wage which took effect in April. RETAIL PAIN IN 2025 The British Retail Consortium has predicted that the Treasury's hike to employer NICs will cost the retail sector £2.3billion. Research by the British Chambers of Commerce showed that more than half of companies planned to raise prices by early April. The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year. It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year. Professor Joshua Bamfield, director of the CRR said: "The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025." Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector. "By increasing both the costs of running stores and the costs on each consumer's household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020." Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
Sky News
12-03-2025
- Business
- Sky News
WH Smith bidder Modella mulls Hobbycraft restructuring
One of the two remaining bidders for WH Smith's high street empire is exploring a restructuring of Hobbycraft, the crafts chain it bought just seven months ago. Sky News has learnt that Modella Capital has drafted in advisers from FRP, the professional services firm, to examine potential options including a company voluntary arrangement (CVA). CVAs - a widely used tool in the retail and hospitality sectors in recent years - are frequently utilised to facilitate store closures and rent cuts from landlords. Sources close to the Hobbycraft process said on Wednesday that FRP's work was at a very early stage, and that no decisions about restructuring measures had been taken. It remained possible that no substantive action would be implemented, they added. A spokesman for Modella said that Hobbycraft traded from 124 stores and had a workforce numbering roughly 2,400 people. Modella, which specialises in buying challenged retailers, is vying with rival firm Alteri to buy WH Smith's entire high street estate, with a deal expected in the coming months. The firm's executives have backed chains including Paperchase and Tie Rack, and the firm last month acquired The Original Factory Shop. Modella bought Hobbycraft, which was founded in 1995, from the private equity firm Bridgepoint last summer.
