It has been reported that Ann Summers, the lingerie retailer, is looking to use a Company Voluntary Arrangement to cut rents and close stores. The company has denied this is the case but has admitted that it is in talks with its landlords. The retailer has 106 stores and has gone from £2m profit to £3.3m loss in this last financial year.
In a statement it has said;
”Ann Summers has absolutely no plans to do a CVA, but given the market conditions and that many stores are over-rented, it makes sense to be having a constructive dialogue with landlords at the present time.
“To say otherwise is pure speculation and unnecessarily upsetting for our people.’’
For a CVA to be appropriate the company has to be insolvent and the rescue mechanism be "fit, fair and feasible" The threat of a CVA should not be used as a negotiating strategy to just ask for rent reductions. Landlords are becoming increasingly annoyed that they are being treated unfairly and it is likely that a CVA will be challenged in the courts soon.
The supposed appointment of KPMG to Ann Summers may have sparked the rumours that a CVA proposal is imminent. KPMG has overseen a number of high profile CVAs recently, such as House of Fraser and Paperchase. Just making a loss doesn't necessarily mean that Ann Summers is insolvent!
Read our page on CVAs for retailers here.
Categories: What is a CVA or Company voluntary arrangement?