Reported last week, UK stationery retailer Paperchase is looking to explore the option of a CVA (Company Voluntary Agreement) in light of their current financial situation.
Paperchase, the stationery retail chain formed in the UK and with expansions across Europe, are considering the option of undertaking a Company Voluntary Agreement (CVA) to help aid its restructuring plans. The retailer is currently working with the advisory firm KPMG, in order to explore further solutions to ongoing financial concerns. Implementing a CVA would see the company follow the same process as Office Outlet late last year.
Slash in Profits for Paperchase
The company, owned by Primary Capital since a management buyout in 2010, saw a huge slash in its profits report last year. A decline in the footfall of its stores is blamed for a profit loss of 67%. Their main credit insurer, Euler Hermes, withdrew cover on new contracts with suppliers before the announcement was made. It is said that cost challenges relating to both in-store rental rates also lead to a sharp decline in their overall profitability. This was despite the company managing to increase their overall sales by 6%. Whilst Papercase had anticipated that its financial situation and cash flow would see an improvement in 2018, this has unfortunately not been the case.
UK Retail Challenges
Commenting on Paperchase’s current situation, Deputy Chairman of Paperchase, Timothy Melgund expressed:
“This is not an enjoyable time, but there is an inevitability given what is happening in the UK retail scene with the general drop in football. Our ecommerce and internationally based businesses continue to perform strongly, but, as many will know, UK retail is severely challenged at present for a whole host of reasons.”
With talk speculating that a dramatic drop in footfall could be at the helm of Paperchase’s financial woes, Melgund clarified:
“The death of the high street is greatly exaggerated, there are many markets where footfall is holding up well, most notably where we have shops in railway stations.”
Possible Outcomes from a CVA
Whilst no official outcome has been determined as to the fate of the retailer, the introduction of a CVA could see Paperchase close several UK outlets in order to regain some of its financial standing. Should a CVA go ahead, Melgund admitted that at this current stage, he has “no idea if any or how many shops would be closed.”
Assurances have been made however, that the company will continue to pay its suppliers to ongoing terms agreed and that the company should be able to continue to supply amid exploring the restructuring options available to them.