River Island mulls CVA as coronavirus hammers sales

Retail Week understands that River Island is considering launching a CVA in a bid to close some of its stores and slash rents on others across its 300-strong estate.

A source with understanding of the retailer’s thinking said that while River Island executives were considering the process, there were concerns about winning enough support from creditors due to the retailer’s still relatively healthy financial position. 

Under the 1986 Insolvency Act, the support of 75% of creditors is required to successfully undertake a CVA. 

The news comes less than a month after Retail Week revealed that the embattled fashion brand would be axing 250 head office roles in a bid to reduce costs following the fall in sales triggered by the coronavirus pandemic and subsequently reduced footfall.

The fashion brand also appears to have recently axed its homewares range, which it only first launched in the spring of 2019. 

The retailer has also introduced a slew of measures to reduce costs during the pandemic including furloughing the majority of staff during the lockdown, a recruitment freeze and temporary pay reductions across the business.

The fashion brand had been struggling even pre-coronavirus crisis. At its last financial update in September 2019, River Island’s operating profits tumbled from £80.6m to £35.1m while sales dipped to £919.7m from £944.5m.

A spokeswoman for River Island declined to comment. 

Numerous retail brands have been forced to look to CVAs or other forms of administration since the coronavirus lockdown was implemented in March.

Just this week both DW Sports has fallen administration blaming lockdown’s effects on sales, while fashion operator M&Co is understood to be on the brink of a pre-pack administration deal which would see it close 50 stores. Other names including TM Lewin, Bensons Beds, Monsoon and Accessorize and Debenhams have all had to take similar steps. 

Other brands like Harrods, Dixons Carphone and Topshop have all also cut jobs in a bid to slash costs.