High street retailers facing up to tough trading times
Numerous high street retailers are said to be considering their futures, as severe financial pressures continue to take their toll.
Mothercare is reportedly on the verge of entering into a company voluntary arrangement in a bid to cut costs, meaning the firm would join New Look and Select in agreeing a CVA in 2018.
The form of insolvency would alleviate some of the cost pressures the firm is facing and could result in a third of its 143 stores nationwide being closed.
The company voluntary arrangement may also see leases renegotiated in an attempt to bring down some of the operational costs for other stores. Greater competition, especially from online retailers, higher operational costs, and economic uncertainty have all piled pressure onto the finances of UK retailers.
Mothercare is reportedly looking to refinance its debts and blamed a poor Christmas trading period for its major difficulties and for a lack of festive discounts.
It should be noted that while sales picked up in the immediate aftermath, this was as a result of aggressive discounting to shift stock and that meant profit margins took a hit.
Carpetright is another store considering its future, while menswear firm Moss Bros and B&Q owner Kingsfisher have issued profit warnings.
For firms facing difficulties, the key is to act quickly as that increases the number of potential insolvency or restructuring solutions that may be available.
A company voluntary arrangement is often used as a means of reducing creditor pressure with the creation of a repayment plan that works for all parties.
Provided that a business is still viable, and that it has been profitable previously, a CVA could be used to restructure in a quick and efficient manner.
Businesses should seek advice on the options available to them if they are facing tough times and a trusted insolvency practitioner can guide them in the right direction
By Phil Smith