JJB Sports was handed a lifeline when its landlords voted in favour of its second CVA.
In the run-up to the vote there were a couple of detractors who threatened to derail the process but it got there in the end by offering landlords a sweetener if its fortunes improve.
Pulling off a CVA is not easy, but JJB showed it can be done. Other retailers will have been watching closely and some will have been encouraged by its success.
Nestling around JJB in the table of quoted retailers are businesses such as HMV, Thorntons, Clinton Cards, Alexon and Blacks Leisure, all of which arguably have too many stores. Of those, Blacks Leisure has already carried out a CVA, HMV, Thorntons and Alexon have all talked of offloading some stores, while Clinton liquidated its Irish arm last month.
HMV and Alexon are well trailed stories. HMV has said it wanted to close 60 stores – which will only solve some of its woes – while Alexon, which warned on profits at the start of the year, has been closing small numbers of stores for some time.
Thorntons’ new boss Jonathan Hart said at the start of the year that 60% of its stores’ leases were up for renewal over the next four years, and he is conducting a large-scale property review. A CVA would be a sensible option, allowing Thorntons to focus on revamping the rest of the business.
Clinton says it has no plans for large-scale closures, but it seems inconceivable that it will continue to need more than 800 stores. The card specialist’s profits slumped in its first half from £20m to £12m.
While nobody wants to see stores closed and jobs lost, retailers simply won’t need as many shops in the future. With etail growth surging there is less need to go to stores for every purchase. HMV is the most notable example of a retailer that has been hit by the digital market, but other markets will evolve just the same.
Further CVAs will be unwelcome for landlords, but by backing JJB, they might well have set a precedent.