High street retailers River Island, Jack Wills and Schuh are pushing landlords to cut their store rents as tough trading and competitor company voluntary arrangements pile on the pressure.
River Island, which has 270 stores in the UK and Ireland, wants to slash rents by up to 40% across most of its portfolio, industry sources said. It is understood to be negotiating turnover-rent deals of up to 12% in its stores in marginal locations.
River Island declined to comment, but one source close to the situation said this is “a very normal process for the business”.
Meanwhile, Jack Wills’ new owner, Sports Direct, is asking landlords to accept rent-free tenancy agreements on some of its worst-performing stores. It is offering landlords 5% of turnover on most of its 100 stores, and is willing to pay full rent on only eight Jack Wills stores, sources said. Sports Direct declined to comment.
Footwear retailer Schuh has also asked landlords for rent reductions after calling in advisers from KPMG to assess options on its 133 stores in the UK, Ireland and Channel Islands.
It said: “It is prudent to review options for any eventualities in market,” but added it has no immediate plans for closures.
Property sources told Drapers retailers are asking for rent cuts to even the playing field: “The best businesses would never pay more than they need to for anything,” one director of a real estate company said.
“It’s partly retailers wanting to increase or maintain profits and partly wanting to avoid getting into difficulty. It is also a degree of survival against the competition and the perception that other competitors are being subsidised, so why not them, too?
“If you look at results generally, even H&M and Inditex - two of the most aggressive negotiators and strongest consumer brands - are both constantly under pressure from analysts and shareholders to drive profitable growth. So even successful retailers are feeling pressure.”
A retail property source said: “Everyone is jumping on the CVA bandwagon, so why wouldn’t they ask for cuts? Healthy retailers shouldn’t be expected to pay higher rents just because their business is strong.”