Kitchen retailer Magnet is to close 15 stores as part of a major restructuring plan designed to reduce unsustainable property costs and protect the stronger parts of the business.
The company has announced that the closures will be implemented through a proposed Company Voluntary Arrangement, commonly known as a CVA.
Magnet said the CVA is intended to address underperforming locations where property costs are no longer sustainable. The majority of its 159 outlets will continue to trade and are not expected to be affected by the proposals.
The proposed CVA will need to be approved by creditors before it can take effect. The process is being overseen by Natasha Harbinson, Will Wright and Chris Pole of Interpath.
Magnet has not confirmed how many employees may be affected by the closures. However, the company said staff impacted by the restructuring will be supported throughout the process and that suitable alternative roles within the business will be offered wherever possible.
Sophie Rose, chief executive of Magnet Group, said the decision had not been taken lightly, particularly where colleagues may be affected.
She said: “Taking this action now is the right thing to do for the long-term health of Magnet Group. It allows us to deal with property costs that are no longer sustainable and protect the stronger parts of our estate.
“I am confident these proposals will help Magnet Group build a stronger, more resilient business that is better placed to serve customers, support partners and return to sustainable profitability.”
Magnet said customer orders at closing sites will be transferred to the nearest alternative store where required.
Which Magnet stores are closing?
The stores earmarked for closure are:
- Andover, Hampshire
- Birmingham Minworth, West Midlands
- Blackburn, Lancashire
- Bridgwater, Somerset
- Brighton, East Sussex
- Colwyn Bay, Wales
- Dorking, Surrey
- Farnborough, Hampshire
- Ramsgate, Kent
- Romford Trade, Greater London
- Stirling, Scotland
- Stockton, County Durham
- Watford, Hertfordshire
- Weymouth, Dorset
- York Trade, North Yorkshire
What is a Company Voluntary Arrangement?
A Company Voluntary Arrangement is a formal insolvency procedure that allows a financially distressed company to reach a binding agreement with its creditors. It is often used where a business is viable but needs time to restructure debts, reduce costs or exit unprofitable parts of its operation.
In a retail CVA, the proposal will often focus on leasehold premises, allowing the company to close loss-making stores, renegotiate rents or reduce future liabilities. If approved by the required majority of creditors, the CVA can give the company breathing space while it continues to trade.
For directors of companies facing pressure from landlords, HMRC or other creditors, a CVA may be one way to restructure the business while avoiding liquidation or administration.
Opinion
Could this be a classic strategy of warning landlords that the property costs of Magnet are just too high? They can close stores via a CVA but the threat of further clsoures will be used as a way to extract rent reductions from the other landlords.
As usual in periods of uncertainty, such as the Iran war, big ticket purchases such as kitchens are sometimes put off putting pressure on cash flow.
