Carpetright to axe 300 jobs and close stores under rescue deal
Around 300 jobs are to be axed at Carpetright after the embattled retailer unveiled plans to shut another 81 stores and tap investors for Â£60 million under a sweeping restructure.
The chain said that, overall, 92 sites had been earmarked for closure, although 11 have already stopped trading, with the rent on another 113 set to be slashed under the company voluntary arrangement (CVA) proposals being put to landlords.
Branches in South Shields and Castletown, Sunderland are among the stores being closed in the North East region. Hartlepool is not listed.
The company said it hopes to relocate staff where possible.
The group - which employs nearly 2,700 staff in total - also confirmed an investor cash-call to raise around Â£60 million through a rights issue to put the company on a firmer financial footing.
The details came as it revealed a "technical breach" of its banking arrangements, but the group said it was taking action to address this and ensure it is amended for the future.
Carpetright chief executive Wilf Walsh said: "These tough but necessary actions will enable us to address the burden of a legacy UK property estate consisting of too many poorly located stores on unsustainable rents, and are essential if we are to restore our profitability and deliver a successful turnaround.
"We will remain in close contact with all colleagues to keep them fully informed as we move through this process."
Shares in Carpetright tumbled more than 23% at one stage after details of the proposals and rights issue.
The firm, which has 409 UK shops, said trading had remained "difficult" since its last update on March 1, with the group continuing to expect a small underlying loss for the year to April 28.
It said the CVA - which is a form of insolvency aimed at protecting a business from going bust by cutting its costs - will help it to "address the competitive threat from a position of strength".
Landlords will vote on the plans on April 26, while shareholders will have their say on April 30.
Commenting on the CVA Proposal, a Carpetright spokesperson said: “We’re announcing today some tough but necessary steps to address our legacy property issues and restore our profitability.
"We are launching a CVA proposal that, if approved, will result in the closure of 81 poorly located or over-rented stores, from a UK total in excess of 400, later this year.
"Planned closures will not affect our customers, all orders will be fulfilled either by the original store or a neighbouring Carpetright where necessary.
“Regrettably, we expect this will mean that around 300 colleagues would leave the business but we will make every effort to find alternative roles for those affected wherever possible. We’re also announcing that we plan to follow the CVA with an equity financing to raise Â£60m of new funds to invest in our stores and online offer, to strengthen the competitive position of the ongoing business.
“It’s important to stress that throughout the CVA process, we will continue trading as normal and customers can continue to shop with Carpetright with confidence. We do not expect the proposed stores to close before September 2018.
“We will remain in close contact with all colleagues to keep them fully informed as we move through this process."
The rescue deal, which is being handled by Big Four accountancy firm Deloitte, marks another dark day for the sector, which has already seen thousands of jobs axed following the collapse of well-known names Toys R Us and Maplin.
High street retailers have been hit by a drop in consumer spending, soaring costs and the increasing threat of online competitors.
The British Property Federation (BPF) praised Carpetright for taking early action to address its trading woes.
Stephanie Pollitt, assistant director of real estate policy at the BPF, said: "These situations are never easy as landlords need to take into consideration the impact on their investors, including those protecting pensioners' savings, as they vote on the CVA proposal."
She added: "Ultimately, it will be for individual landlords to decide how they will vote on the CVA, but the proposal has sought to find a solution that works for all parties."
THE FULL LIST
Bangor – Northern Ireland
Belfast – Newtownabbey
Edinburgh – Leith
Glasgow – Great Western Road
Glasgow – Parkhead Forge
Hamilton – Carpetright
Hamilton – Sleepright
Inverness – Merkinch
Leeds – Birstall
Leeds – Hunslet
Reading – Oxford Road
Sheffield – Meadowhall
Sunderland – Castletown
Thornton Heath – Carpetright & Sleepright
Wakefield – Cathedral,
Wakefield – Westgate (Storeys)
Wigan – Robin Park,
York – Foss Island