Paperchase stores under threat as retailer launches restructuring plans
Paperchase is set to close a small number of its shops as part of a restructuring plan, as it becomes the latest victim of the UK’s high street crisis.
The retailer has launched a company voluntary arrangement (CVA) which will see it ask landlords for reduced rents and walk away from some locations.
The plans, put together by advisers at KPMG, propose a 50% rent reduction on 28 sites for three months.
After this period, Paperchase could either close the shops or seek a rent-free period, with a small number expected to close.
In a statement, the company said: “While the majority of the 145 store estate will continue to trade as normal, Paperchase expects a small number of loss making stores will be closed as part of the process.
“Paperchase will work closely with employees affected by the closures to try and ensure their continued employment with the business.”
Another 70 sites will be subject to turnover-linked rents, with landlords being guaranteed between 35% and 80% of the original rent depending on the store.
A further 45 sites will remain largely unchanged.
Duncan Gibson, CEO of Paperchase, said: “Paperchase is a much loved brand, with a loyal customer base, and a fantastic design-led product offer. However, we need to reshape our store estate in order to ensure a long-term, sustainable future for the business.
“We have decided to take decisive action now to ensure we’re able to succeed in the future. We believe this is in the best interests of the company, our people, creditors and our customers.”
Creditors will be given a vote on the proposals, scheduled for March 22.
Will Wright, a restructuring partner at KPMG who will oversee the process, said the company had been hit by the difficult conditions on Britain’s high streets.
“Over the last 50 years, Paperchase has grown to become one of the UK’s most well-known and innovative design-led stationery retailers,” he said.
“However, like many other businesses in the retail sector, the company has been adversely affected by a cocktail of well-documented issues, including a reduction in footfall, increased rents and business rates, and margin pressure from sterling depreciation.”
It emerged that the stationery chain had called in KPMG earlier this year, when it was reported to be weighing up a number of options including a sale to a new owner and store closures.
The most recent available accounts for Paperchase Worldwide Holdings show the company’s turnover increased by 6% to £134.8 million in the year to February 3 2018, due to new openings in the UK and Germany as well as online growth.
But pre-tax losses widened to £6.6 million in the same period.