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Arcadia reveals stores to close under CVA

Arcadia Group has proposed seven company voluntary arrangements (CVAs) across its companies, which if approved would result in 23 UK store closures and the closure of all eleven Topshop Topman stores in the US.

The group has instigated seven CVAs in relation to certain group companies, alongside a “comprehensive” turnaround plan which it believes will return the business to growth after a sustained period of declining trading performance.

Under the proposals, Arcadia has earmarked 23 out of its total 566 UK and Irish trading locations for potential closure.

They include: Aberdeen (Dorothy Perkins/Burton Menswear); Ashton Under Lyne (Topshop Topman); Bedford (Topshop Topman); Cheshunt (Outfit); Bluewater (Miss Selfridge); Fareham (Topshop Topman); Glasgow – Buchanan Street (Burton Menswear/Topman); Luton (Topshop Topman); Newcastle upon Tyne - Northumberland Street (Outfit); Nuneaton (Topshop Topman); Reading (Dorothy Perkins/Burton Menswear); Salisbury (Topshop Topman); Southend (Miss Selfridge); Stirling (Dorothy Perkins/Burton Menswear); Swindon (Miss Selfridge/Wallis/Evans); Swindon (Dorothy Perkins/Burton Menswear); York (Dorothy Perkins/Burton Menswear); Cork (Dorothy Perkins/Evans); Dublin – St Stephen’s Green (Topshop/Miss Selfridge); Dublin – Jervis (Topshop Topman); Dublin – Henry Street (Evans/Wallis); Dublin – Liffey Valley (Wallis); Galway (Miss Selfridge).

The CVA, which will be put to a creditor vote on 5 June, also proposes rent reductions and revised lease terms across 194 locations.

The remaining 349 locations will be unaffected by the proposals. All UK and Irish trading locations will remain open and trading as normal during this period, and the group’s online sales channels “will be completely unaffected by the proposed changes”.

In an official statement, the group said: “These proposals form part of a wider turnaround plan which will drive greater cost efficiencies, enable store investment and further develop the group’s multi-channel proposition to deliver a better experience for customers. No UK or Irish trading locations will close in the short term, and employees and suppliers will continue to be paid on time and in full.”

As part of the group’s turnaround plan, Arcadia is also restructuring its US operations in line with its strategy to deliver its US retail offer through its wholesale partners and digital platform.

As a result, the group has begun a process which may result in the closure of all eleven Topshop Topman stores in the US.

The group said it has “engaged extensively with its key stakeholders ahead of launching the CVA proposals in order to balance the needs of the group and its landlords, pension trustees, suppliers and other creditors.”

It said it ”is committed to keeping redundancy levels to a minimum”. The locations which have been identified for potential closure employ 520 people.

”Every effort will be made to redeploy affected colleagues within the business where possible, and any staff unable to be assigned a position elsewhere in the Group will be eligible for applicable redundancy payments”, the statement added.

Additionally, and as part of the CVA proposals, Lady Green, the group’s shareholder, will invest £50m of equity into the group, in addition to the £50m of funding which was provided in March.

She has also agreed to provide all affected landlords with an entitlement to a pro-rata share of 20% of any equity value in the group upon a future sale. Landlords will also “be able to claim against a £40m compromised creditor fund and will not suffer any compromise of dilapidations on currently occupied stores”.

The group is also progressing discussions with the trustees of its two largest pensions schemes, the Pensions Regulator and the Pension Protection Fund (PPF). The company has previously been paying £50m in contributions to the schemes each year. 

As part of the restructuring, the new proposals would reduce the contributions from the company to the schemes from £50m to £25m per year, for three years, with security over certain assets being granted in order to provide support to the schemes.

Lady Green has offered to bridge the shortfall with funding of £25m per year for the next three years, plus an additional £25m contribution, resulting in total payments from Lady Green into the schemes of £100m.

Daniel Butters and Ian Wormleighton of Deloitte have been appointed as nominees to the CVA.

Ian Grabiner, CEO of Arcadia Group, said: “Against a backdrop of challenging retail headwinds, changing consumer habits and ever-increasing online competition, we have seriously considered all possible strategic options to return the Group to a stable financial platform.

“Following constructive discussions with all key stakeholders, we believe that a CVA is the best course of action to reduce our fixed cost base and ensure we can continue meeting our commitments to pension trustees, staff, creditors and our extensive supply chain for the long term, while continuing to serve customers through our portfolio of quality fashion brands.

“We have in place a well-developed turnaround plan for the Group, which includes driving cost efficiencies and managing the refreshed retail store estate and investing in the continued development of our multi-channel proposition and logistics. The plan will be executed by the Group’s recently strengthened senior management team, made up of top talent from across the retail industry who are committed to returning the Group to growth.

“This has been a tough but necessary decision for the business. We will ensure all potentially affected colleagues are kept fully informed as we seek approval from our creditors on today’s CVA proposals.”

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