Speciality Retail Group chairman Peter Lucas has vowed that the struggling menswear retailer will make a profit in the year to January 2011, after it was rescued from administration by a company voluntary arrangement on Tuesday.
Lucas said: “The business is stable now and we are on a good footing for the future. I will be very disappointed if we don’t exit next year in profit.”
SRG suffered losses of £7.5m in the 11 months to January 2, 2010. It is now expected to slim down from a 71-store chain to a 30-store, predominantly out-of-town offer.
The CVA was approved by 98.1% of the retailer’s creditors - it needed 75% to be passed. The chain proposed to shed 42 loss-making Suits You stores and the terms were deemed more favourable than previous CVAs because it did not propose to close stores immediately.
The CVA proposed landlords of loss-making stores would receive 60% of the full rent for 18 months - equating to 11 months’ rent - and if landlords want to take on new tenants, they could do so by giving 45 days’ notice.
Lucas said: “We are keeping some high street flagship stores but the out-of-town stores have proved much more successful and the costs are lower. Customers have been cautious and are looking for designer clothing and outlet prices.”
Richard Fleming, UK head of restructuring at KPMG, which was appointed by SRG to oversee the process, told Retail Week: “The terms of this CVA suited the needs of the business. It will be a blueprint for some CVAs but this model will not be replacing the model KPMG has used previously.”
Duncan Grubb, head of credit control at landlord Hammerson, supported the CVA as “it was considered to be a genuine attempt to rescue and reposition a failing business, rather than an attempt to gain a strategic advantage”.
However, the British Property Federation chief executive Liz Peace sounded a note of caution, saying landlords are “caught between a rock and a hard place”.