Embattled stationary retailer Paperchase proposed a controversial restructuring process last night, as it became the latest high street chain to opt for store closures amid a swathe of industry-wide challenges.
The group, which is set to shut down five of its 145 stores while putting another 23 at risk of closure amid efforts to slash their rent in half, confirmed that it was undergoing a company voluntary arrangement (CVA) in a bid to renegotiate terms with its creditors.
Yesterday’s announcement is a fresh sign of the current troubles facing many of Britain’s physical retailers, which have struggled to maintain their estate amid rising rents, higher business rates and increased competition from online rivals.
Will Wright, KPMG’s proposed 'supervisor' of the CVA, said: "Over the last fifty years, Paperchase has grown to become one of the UK’s most well-known and innovative design-led stationery retailers. However, like many other businesses in the retail sector, the company has been adversely affected by a cocktail of well-documented issues, including a reduction in footfall, increased rents and business rates, and margin pressure from sterling depreciation."
"Today’s announcement follows a detailed strategic review of the business undertaken by the company’s directors, during which a series of consultations with key stakeholders took place at which soundings were taken on whether they would be supportive in principle of the company proposing a CVA.
"We believe that what has been put forward today reflects the feedback received during this process, and specifically, gives the company the ability to rationalise its store portfolio by exiting stores that are unprofitable, secure rent reductions where stores are over-rented and implement turnover rents to reflect the highly seasonal nature of the business.
"As part of the review, the directors have also been successful in negotiating a financial restructuring with the company’s lenders, which will enable new investment to come into the business. Such additional investment and the completion of the wider restructuring is however conditional on the approval of the CVA proposal and successfully concluding the subsequent challenge period."