Paperchase seeks linking rent to store turnover amid sales talk

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Paperchase CVA
// Paperchase seeks new rent arrangement that is linked with store turnover
// Could form part of a new type of CVA that is might launch by the end of this month
// Talks with landlords and potential bidders continues

Paperchase is reportedly eyeing the possibility if linking its rent to store turnover as talks with landlords about a restructuring plan continues.

According to The Telegraph, the stationery and greetings card retailer was seeking this option as part of a new type of CVA that could help avoid drastic store closures and a reduction in property costs.

It comes after Paperchase’s parent company Primary Capital called in advisers from KPMG to explore a potential CVA last month.

KPMG has reportedly been in contact with prospective bidders about a deal which could see the retailer change hands for the first time in nearly 10 years.

It is not yet clear if Paperchase would launch a CVA as yet, but it still has until the end of February to decide so as to provide landlords enough notice before quarterly rent is due at the end of March.

KPMG was called in after the retailer’s falling sales and footfall did not improve over the crucial Christmas trading period.

In addition, accounts filed at Companies House late last year saw Paperchase swing to a statutory pre-tax loss of £6.3 million for its fiscal year ending February 3, 2018.

Earnings also halved from £9 million to £4.5 million, but total sales increased 5.6 per cent year-on-year to £131.2 million, boosted by a 29.5 per cent surge in online sales and a 12.8 per cent increase in international sales.

Paperchase also had its credit insurance reduced in September amid concerns about the retailer’s finances.

Additionally, Primary Capital injected £4.5 million into Paperchase last year to repay debts.

Primary Capital had also tried to sell Paperchase in 2014 and even considered a stock market flotation in 2016, which was eventually shelved.

Paperchase, which employs 2000 staff, operates around 130 stores in the UK.

It has another 30 stores throughout Europe and the Middle East.

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2 COMMENTS

  1. Rents are not actually too high. The problem that is overlooked is that footfall and sales are down year on year on year every year.
    A store that existed in 1989 might have taken £2 million quid on £200k rent but today that very same store will probably only take £1m but the rent with reasonable inflation will be £500k.

    Tying rent to a percentage of turnover is the way to go and is the only way to rebalance the reduction in money being spent in the high street.

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