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Paperchase restructuring via a CVA: 28 stores to close

Written by Robert Moore Marketing Manager 4 March 2019

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Paperchase looking at CVA according to reports

Update 4th March 2019:

Stationery shop, Paperchase launch a CVA. 

They seek a rent reduction for 50% of 28 of their stores, for a 3 month period. When the period ends, they will either seek a rent free period or close stores. Of all their stores, the majority will remain trading, yet the loss making selection, will close. 

70 stores will be guarantee landlords 35-80% of its original rent, store and turnover dependent. 45 stores remain unchanged.

The date of the creditors meeting is rumored the 22nd March 2019. 

In the meantime, all employees affected by the current affairs, are encouraged to talk to advisers at the appointed, KPMG.  Additionally, see our 'redundant employee' guide of advice here.

Just in February of last , the companys' turnover had risen by 6 per cent, to £134.8 million. Online growth and new UK and Germany openings initiated this. However, £6.6million worth of pre-tax losses joined these figures, reinforcing its financial struggles. 

Paperchase CEO, Duncan Gibson, explained what a loved brand Paperchase is, accompanied by a loyal customer base and ''fantastic design-led product offer''. He believes it is now time to focus on the sustainable future for the business and think strategically, hence reshaping their store portfolio. 

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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.

Categories: Retail, What is a CVA or Company voluntary arrangement?

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