Written by: Keith Tully
Published: 22nd March 2018
Carpetright is looking to close some of its most unprofitable stores as it considers entering a company voluntary arrangement (CVA) rescue deal to avoid becoming the next British high street retailer to fall into administration.
Hopes within the business are that a CVA deal and a subsequent financial restructuring will allow for sizable rent reductions and the closure of an as-yet unspecified number of loss-making outlets.
Plans are also being hatched to raise tens of millions of pounds to support a renewed operating strategy across Carpetright’s business, which currently employs close to 3,000 people and has more than 400 stores and concessions in the UK.
Like so many other British high street retailers, the carpet and flooring company has been struggling to deliver sustainable profits and was recently obliged to scale back expectations for its full-year financial performance.
Bosses at the business have said that they are now exploring the possibility of entering a CVA, the terms of which would need to be approved by a majority of creditors in order to be brought into effect.
The current chief executive of Carpetright, Wilf Walsh, has said that much of the blame for the company’s financial predicament should rest at the feet of its previous owners.
“The aggressive store opening strategy pursued by the company’s previous leadership has left Carpetright burdened with an oversized property estate consisting of too many poorly located stores on rents which are simply unsustainable,” he said in a recent statement.
“The company has worked hard over recent years to address this legacy issue and reduce the size of its property estate, however many of these poor performing stores still have long leases to run, which has limited our ability to exit a meaningful number in the short-to-medium term.”
A growing number of British retailers are seeking ways to reduce their overheads and improve their financial performance in the face of some significant operational headwinds.
Toys R Us and the electricals chain Maplin both entered administration in February, while the fashion retailer New Look recently closed down dozens of outlets and shed hundreds of jobs in an effort to avoid a similar fate.