Embattled retailer Carpetright has put jobs under threat as it draws up sweeping restructuring plans which will close poorly-performing stores and see it tap investors for up to £60 million.
The group said it was “exploring” a company voluntary arrangement to help shore up its financial position, a move which would allow it to close loss-making shops and secure deep discounts on rental costs.
The move comes as embattled retailer New Look said it had agreed a restructuring plan with creditors that will see it shut 60 stores, resulting in the loss of up to 980 jobs.
Under the terms of the Company Voluntary Arrangement (CVA), the firm has also secured rent reductions on 393 stores.
The closures - nearly 10% of its 593-strong UK store estate, - will lead to a maximum of 980 redundancies, although New Look will redeploy staff where possible.
New Look chairman Alistair McGeorge said: “In order to help restore long-term profitability, it is clear we need to reduce our fixed cost base.
“We are therefore pleased to have gained the support of our creditors to address our over-rented store estate. Launching a CVA has been a tough decision and our priority remains keeping all potentially affected colleagues informed during this difficult time.
“The CVA is one of a number of necessary actions we are taking to get the company back on track.
If its CVA goes ahead, Carpetright would push through an equity issue of between £40m and £60m to fund plans to reboot the business and drive down debt.
The group, which has 409 UK shops, also agreed a £12.5 million unsecured loan from major shareholder Meditor to help with “short-term working capital requirements”.
It marked another dark day for Britain’s beleaguered high street, with Mothercare confirming that it had reached an agreement with lenders to defer the testing of its financial covenants as it “engaged in preliminary discussions” on securing additional financing.
Carpetright CEO Wilf Walsh said it would be “business as usual” during Easter and it would remain in “close contact” with staff over its restructuring plans.
“I am pleased we have secured this additional support from one of our major shareholders as we continue to explore the feasibility of a CVA and a conditional equity issue.
“These further cash resources will enable us to make the necessary decisions free from short-term funding pressure.”
An aggressive store opening strategy from the previous leadership had left Carpetright burdened with an oversized property estate of “too many poorly located stores on rents which are simply unsustainable,” he said.