Major discount chain with 187 stores plots restructuring that could lead to ‘significant’ closures
A MAJOR discount chain is preparing to undergo a restructuring plan that could place stores at risk.
Modella Capital, the new owner of the Original Factory Shop, is looking to launch a Company Voluntary Arrangement (CVA) at the chain, according to Sky News.
A CVA is a way of restructuring that means a business can continue trading by negotiating its debts, such as cutting rent costs with landlords.
It is a common way for struggling businesses to try and stay afloat, with chains such as Caffe Nero and Body Shop having previously entered into one.
Sources said an announcement regarding the CVA could be made in the coming days, but the arrangement will require court approval.
The move has placed uncertainty over the discounters portfolio of 187 high street stores, with the outlet adding it could lead to “significant” closures and job losses.
Modella is also looking to negotiate two-year rent-free periods at some shops in a bid to shore up costs.
It’s important to note that any restructuring can mean a variety of different things, and for now, all shops are open for business as usual.
The Sun has approached the firm for comment.
It comes just two months after the private equity firm – which recently snapped up WHSmith‘s high street arm – bought The Original Factory shop.
Duke Street Capital, which had owned the company since 2007, attempted to offload the business in 2023 through Deloitte, but a deal never came to fruition.
While many bargain stores such as B&M and Home Bargains have seemed to profit from the cost of living crisis, The Original Factory store has struggled to stay afloat.
The retailer has shuttered more than a dozen stores over the past 12 months, including sites in Great Harwood in Lancashire and Invergordon, Scotland.
Despite the closures, the retail chain also opened 27 stores in 2024 and still has plans to continue its “store transformation” programme this year.
Here is a full list of stores that have opened since August 2023:
- Kirkintilloch – opened August 24
- Stonehaven – opened August 31
- Blandford Forum – opened August 31
- Haddington – opened September 7
- Wetherby – opened September 7
- Nairn – opened September 14
- Ashbourne – opened September 14
- Castle Douglas – opened September 21
- Penrith – opened September 21
- Inverness – opened September 28
- Attleborough – opened September 28
- Ayr – opened October 5
- Ringwood – opened October 5
- Perth – opened October 12
- Lanark – opened October 19
- Peterhead – opened October 26
TROUBLE ON THE HIGH STREET
Many retailers are continuing to feel the pain of higher rents and shoppers having less money to part with at the till.
Hikes to National Insurance contributions, imposed this month, have also added to business costs.
Last month, budget clothing chain Select Fashion went bust, leading to 35 store closures.
Back in February, Quiz tumbled into insolvency, closing 23 stores.
Elsewhere, Poundland’s parent company Pepco is said to have hired advisory firm Teneo to oversee the sale of the UK business.
It comes after Pepco said it was looking at “all strategic options” to separate Poundland from its brand.
The Polish group said it might turn its focus to its more profitable businesses in Europe.
Pepco previously warned that upcoming hikes to employer National Insurance Contributions (NICs) and national minimum wage would significantly add to its costs.
RETAIL PAIN IN 2025
The British Retail Consortium has predicted that the Treasury's hike to employer NICs will cost the retail sector £2.3billion.
Research by the British Chambers of Commerce shows that more than half of companies plan to raise prices by early April.
A survey of more than 4,800 firms found that 55% expect prices to increase in the next three months, up from 39% in a similar poll conducted in the latter half of 2024.
Three-quarters of companies cited the cost of employing people as their primary financial pressure.
The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”