1. News
March 22, 2018

Carpetright plans to close underperforming stores in rescue deal

Carpetright is looking to close underperforming stores and reduce unsustainable rents as part of a turnaround plan.

Carpetright is looking to close underperforming stores and reduce unsustainable rents as part of a turnaround plan.

It is exploring a company voluntary arrangement (CVA), but it is not yet known how many outlets it plans to close or the number of jobs would be axed.

Carpetright chief executive Wilf Walsh had stated that the firm’s earlier management had opened several outlets at poor locations.

Walsh was quoted by Sky News as saying that the previous management’s approach had left Carpetright ‘burdened with an oversized property estate consisting of too many poorly located stores on rents which are simply unsustainable’.

“If the CVA plan proceeds, Carpetright intends to raise up to £60m through equity issue to reduce its debt.”

However, plans to close underperforming stores has become difficult as several of these outlets come with long leases.

Walsh said: “The board is therefore exploring the feasibility of a CVA in order to expedite the rationalisation of its property portfolio, with the clear objective of establishing a right-sized estate of contemporary stores, on economic rents, complemented with a compelling online offer.”

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If the CVA plan proceeds, Carpetright intends to raise up to £60m through equity issue to reduce its debt.

The struggling retailer employs 2,700 people and has 409 shops in the UK.

It also agreed to a £12.5m emergency loan to ease its short-term funding pressure.

Meanwhile, the stores would continue to operate as usual to capture the Easter sales.

The firm also plans to be in ‘close contact’ with employees over its restructuring plans.

As per the current price of 41p per share, the valuation of the business stands at less than £30m.

In addition to fashion retailer New Look, restaurant chains Jamie’s Italian and Byron burger chain also opted for rescue deals.