Paperchase, which has 2000 staff and 130 stores, has hired advisers at KPMG to look at a Company Voluntary Arrangement according to a report in the Telegraph.
Christmas has been very tough with retailers suffering the worst December since 2008. Competitor Card Factory said last week that it would face another “difficult year” resulting in a sharp decline in their shares.
Paperchase had its credit insurance reduced in September amid concerns about the company’s finances. The owners Primary Capital put in £4.5m of funding into the business last year to repay debts.
Pre-tax profits at Paperchase fell 88pc to £613,000 for the year ending January 2017 on the back of lower footfall, expensive rent and rates bills and foreign currency exposure, according to the latest available accounts at Companies House. Sales lifted 4pc to £119m over the period, helped by its international arm and online sales.
Paperchase is therefore looking at ways to reduce its overall costs and what better way than to try and do a CVA with the landlords to exit loss making stores. Private equity owners of retailers are looking at this option more and more. Is it fair? Read our review of the CVA debate we held in our offices last year.