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Select creditors point to 'warning signs' for high street

Creditors to Select have expressed growing concern about the future of the high street, after the majority approved the value womenswear chain’s company voluntary arrangement (CVA) last week.

Landlords and suppliers gave Select’s CVA proposals the go-ahead on 13 April with a 94% majority vote. Under the plans, rent bills will be slashed by up to 75%.

Select owner Cafer Mahiroglu told Drapers: “There was a bit of [trepidation] from a few [creditors], but they were all very supportive in getting together and conveying a positive message to the high street. They understand fashion retail has changed dramatically over the past 10 years. Landlords need to think about [rents] more carefully – smaller town centres are dying as rent pressures increase.”

He added: “CVAs can only work effectively if there is no debt, of which we have none whatsoever. I think the CVA presents a good opportunity to reshape and redesign the business, and to put it in the right position going forwards.”

Although reluctant to accept rent cuts, Select’s landlords were resigned to the retailer’s use of the process.

A senior source at one of its property creditors said: “There is little landlords can do, the depth of demand out there is relatively thin and compared to getting someone new in with [a] free-rent period and clauses, [it] could mean that it’s the better the devil you know.”

He added: “If there is a downward trajectory in the market, then some of these businesses will not survive.”

Other suppliers said their confidence in the retailer, and the high street in general, had been shaken.

“It is concerning to us that Select needed to do this,” said one Select supplier.

“It is worrying that more of our high street customers seem to be struggling. The warning signs are there. As more large retailers face difficulties, we might see this [filter down] to the manufacturers too, in areas like Leicester.”

Another supplier said: “It is a tough time for our retail customers. It depends [on the business], but [as a supplier] you have to be a bit more careful.”

He added that the Select has sent “assurances that payment would come”.

Another supplier said he was encouraged by Select’s efforts not to close any of its 183 stores or make redundancies, but argued there needed to be a change in law to protect suppliers: “We were swayed by the fact that Select wanted to keep stores open and staff. The law needs to change rather than retailers, who see CVAs as a valid option. It is always the suppliers or in this case the landlords who will get affected, but from Select’s point of view it’s a viable route to take.”

Select employs 1,618 store staff and 132 head office employees. 

 

 

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