The past six months has seen several UK retailers and department stores apply for a Company Voluntary Arrangement (CVA), allowing them to close loss-making stores, in response to a testing combination of weaker consumer spending, higher labor costs and business rates and the long running impact of a weaker pound. After issuing a profit warning in June, department store chain Debenhams said UK retail is experiencing “exceptionally difficult times”.
Another UK department store, House of Fraser, recently-announced a CVA which will involve the closure of 31 stores. Major chains, including Carpetright, children’s clothing specialist Mothercare, fashion chain New Look, have also launched CVAs this year. Clothing retail chain, Next, has asked for a CVA clause, which would give the chain a discount rent if nearby rival stores are under CVA terms.
“We are certainly seeing a general shortening of leases in the UK retail sector, and a rise in flexible leases,” says Colin Burnet, Director, EMEA Retail Research. “CVAs have shone a spotlight on lease structures but the changes we’re seeing reflect more of a fundamental shift in the market that’s moving the balance of power in favour of retailers.”
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