Austin Reed is set to close up to 31 stores this year as it seeks a £3m cash injection from shareholders.
The UK fashion retailer hopes to secure a Company Voluntary Agreement with 66 landlords which would allow it to pay a fifth less rent on 35 stores and 50% less on a further 31. These 31 stores would then close six months later reducing the fashion retailer‘s total number of outlets to around 200.
Under the proposed terms of the CVA, Austin Reed‘s flagship shop on Regent Street and 165 other stores will continue to trade as normal. Landlords and creditors are set to vote on the proposed agreement on 5th February.
It is hoped that this radical restructuring will secure The Austin Reed Group‘s long-term stability. In early December the group‘s principal shareholder, Darius Capital, appointed Deloitte to work on a restructuring plan. This followed losses of £1.29m on total sales of £109m on the year to 31st January 2014. It appears that the unusually warm autumn, reducing demand for winter ranges, may have proved the final straw.
As well as the classic menswear and womenswear chain, the group also owns CC and Viyella. Long-standing Chief Executive Nick Hollingsworth, who previously oversaw the company‘s delisting from the stock market in 2006, commented:
“The actions that we are taking will ensure a long-term sustainable future for the brands in the group, and will provide a solid financial platform from which to operate and grow the business. The decision to close some stores was not taken lightly but we cannot continue to operate those within our portfolio that are loss-making.”
Austin Reed, Viyella and CC‘s websites are all currently advertising large sales. The latter, in particular, is dramatically promoting “The Ultimate Clearance Event” with up to 80% off normal prices.
Retailers who have gone through CVAs in recent year s include JJB Sports and Clinton Cards. Under the terms of the agreement, if a limited company is insolvent, it can use a CVA to pay off its creditors over a fixed period. However, a CVA can only take place if it is approved by creditors owed at least 75% of the total debt.