At the time, landlords and competitor retailers decried the injustice of the CVA system that enabled struggling brands to shrug off unprofitable stores and debts, that otherwise would have resulted in their collapse. With landlords left out of pocket and with empty stores to fill, and retailers that didn’t pursue CVAs forced to compete on an unequal footing, these sentiments had were justified.
But is a more positive angle to these CVAs now emerging?
Historically CVAs were largely a delaying mechanism, acting as a steppingstone towards administration and liquidation. But increasingly we are witnessing a series of retailer success stories emerging out of the more recent post-Brexit and Covid-lockdown CVAs.
Not only have these brands survived CVAs, but they have bounced back stronger and are now expanding their store footprints once more. And what’s surprising many in the industry is the sheer speed of the turnaround – these retail phoenixes are rising up only a year or so after their CVAs were actioned.
Take Moss as a clear example. Despite embarking on a CVA in November 2020 – which resulted in the closure of up to 25% of its stores – this key British menswear retailer is now back signing new leases in carefully selected locations. MMX Retail has advised Moss on many of these deals, including London’s Jermyn Street and Canary Wharf, as well as Guildford, Brighton, Shrewsbury, and Eastbourne.
Another of our clients has a similar story to tell. In December 2020 premium womenswear brand LK Bennett used a CVA to close five stores, but over the last 18 months has been back on the store hunt, opening shops on London’s Bond Street and Hampstead, Gunwharf Quays and Edinburgh.
HMV is another high-profile success story. Its 2019 CVA now feels very distant in the rear-view mirror after the retailer recently opened stores in locations including Newbury, Merry Hill, Edinburgh, Canterbury and Bath. Meanwhile, Monsoon has opened 12 new stores over the last 18 months – including its new Boutique concept on Marylebone High Street and in Bluewater – following its own 2019 CVA.
The list goes on with other CVA participants including Ann Summers, Paperchase, New Look and Quiz all now taking new space.
And this phenomenon is not just reserved for retailers.
In 2020 Pizza Express, Byron and itsu all entered into CVAs only now to be back opening sites across shopping centres and high streets.
The fact these phoenix brands have been able to resurrect their businesses after shedding hefty liabilities, stands testament to the strength of their core businesses. High rents – compounded by upward-only rent reviews – and rising business rates, proved a toxic combination for these bricks-and-mortar retailers at a time when consumer demand post-Brexit and then into the Covid lockdowns hit in-store sales. But once these unprofitable stores were removed from the equation, suddenly these businesses became viable once more.
There is, of course, no escaping the controversy that will continue to shroud the CVA process – landlords do take a hit and are forced to reinvent spaces in response to losing underperforming tenants. But as UK Retail enters what is expected to be a period of strain – with the country widely believed to already to be in recession, the cost-of-living crisis bearing down on consumers, and rising energy bills hitting retailers’ profits – perhaps as a sector we should focus on the future potential upside of a process that enables brands to survive shock downturns and emerge stronger?
After all, once expanding again, these brands could help to bolster and rebuild our struggling town centres. By keeping these retailers afloat, the UK’s high streets and shopping centres are simultaneously supported and vacancy rates kept under control. Yes, some towns have been, and will be, hit by the closure of some unprofitable stores, but had these retailers collapsed entirely the shutters would have come down on many more stores nationwide.
The cautious and calculated expansion of these post-Brexit and Covid-lockdown CVA phoenix brands, offers a glimmer of confidence in what is currently a fragile retail sector. Having learnt the lesson from their past CVAs, the hope must be that these renewed acquisition plans have been built on firmer store strategies, taking a more informed approach to growth, understanding the impact of ecommerce on store sales and consumers continued desire for bricks-and-mortar experiential retail. There will undoubtedly be more CVAs in the months to come, but if the brands that resort to these can use the process to pivot their business back towards profitability and growth in a difficult market, that potential for possible future growth is surely worth nurturing?
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