H&M has butted heads with landlords after demanding that new rent agreements deduct returns from revenue.
The Swedish fashion titan is not only pushing for turnover-based rents, but also demanding that items returned to store, including from purchases made online, be deducted from that shop’s revenue, industry sources told The Times.
The fashion group operates 304 stores across its 4,739-strong global store estate in the UK under fascias including H&M, Monki and & Other Stories as well as recently debuted stores H&M Home, Arket and Weekday.
Turnover-based rents are becoming an increasingly popular means of cutting down costs, with businesses from Mike Ashley acquisition House of Fraser to healthier brands such as Next reportedly demanding rent cuts on these terms.
The move by retailers follows a slew of CVAs by struggling retail businesses including Philip Green’s Arcadia empire, New Look and Mothercare.
H&M is reportedly offering landlords ‘total occupational deals’ which propose to give landlords a lump sum linked to the amount of revenue made from an individual store and leave it to them to divide that amount between service charges, rent and business rates.
Because for some stores business rates are more expensive than rent, this arrangement would inevitably force some landlords to accept nominal rents in order to cover the costs of other charges on the property.
H&M’s demand that landlords cover the cost of returns is being seen as too aggressive, with some landlords rejecting the offer.
H&M said: “Like every retail business, we work with our landlords to draw up lease agreements that allow us to run a successful store portfolio. We won’t discuss the details of individual contracts as we consider this information to be commercially sensitive.”
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