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LONDON – British retail brand AllSaints is looking to make a deal with landlords on both sides of the Atlantic, arguing that closures due to COVID-19 lockdown, and new social distancing measures, have damaged sales considerably.
To solve that problem, the company is undertaking an insolvency procedure known here as a company voluntary arrangement, or CVA, and will seek to reach a deal with its landlords that will see some stores shut and others move to a new payment structure.
The move is a common one in the U.K. and aimed at preserving the overall business. Philip Green’s Arcadia Group, which owns Topshop, took similar measures last year, enacting a series of CVAs, while the department store Debenhams struck a similar deal with its landlords and creditors in order to continue trading.
AllSaints said that prior to the outbreak of the coronavirus earlier this year, it had delivered year-on-year revenue growth for five successive years. In its most recent financial year, ending Feb. 1, 2020, it delivered sales growth in every region and across every channel in which it operates.
However, the closure of the vast majority of the group’s retail estate around the world has had “a substantial and sudden impact” on its short-term sales, AllSaints said. As a result the brand said it took immediate actions to mitigate the impact and reduce costs, “including a range of measures to maximize online sales, as well as halting all discretionary spend and using government support where possible.”
AllSaints said that as it re-opens its stores, it is now having to grapple with “extensive” social distancing measures and “significant uncertainty around customer appetite to travel and shop in store.”
A compromise with the group’s creditors, via the CVAs, is now required to ensure the viability of AllSaints’ business. “This will enable the group to sustain a strong physical retail presence, which in turn will allow it to protect jobs and continue to serve its customers,” it said.
AllSaints plans to put forward a proposal to its landlords that will see most of its 41 stores in the U.K. and 42 stores in North America move to a percentage rent structure, which the brand said aligns landlords with the group’s recovery and protects the it against further risk of retail closure.
In addition, a small number of stores will close where business is not feasible. Creditors will vote on the proposal at meetings on July 3 in the U.S. and on July 6 in the U.K.
AllSaints noted that the leases on its stores in the U.S. and Canada are held by a subsidiary that is registered and managed in the U.K. The U.S. business is therefore able to participate in the CVA process.
Peter Wood, chief executive officer of AllSaints, said the new measures will “ensure the long-term viability of AllSaints in the face of the unprecedented impact that COVID-19 has had on our business and the wider fashion retail industry. The CVAs will allow us to sustain a strong physical retail presence, which in turn will allow us to protect jobs and continue to provide great product and service to our customers. We remain confident in the long-term prospects for our brand.”
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