Marks & Spencer chief executive Steve Rowe has added his voice to the chorus of concern over retail’s property cost crisis.
M&S intends to close 100 shops by 2022. Rowe said some of those stores could have remained open were it not for the crushing burden of an outdated rental system and punitive business rates.
Rowe’s intervention came as retailers ranging from New Look to Carpetright and Mothercare have launched CVAs to exit underperforming stores and win lower rents. Department store group House of Fraser is likely to pursue a similar route.
CVA clause demands
At the weekend, it emerged that fashion giant Next wants ‘CVA clauses’ inserted in its rent contracts in locations where neighbouring retailers have won concessions through the insolvency procedure.
Rowe said at M&S’s results briefing today that he had “a great deal of sympathy” with Next chief executive Lord Wolfson’s view.
He maintained: “Landlords need to face into the changing dynamics of the market – upward-only [rent reviews] will not work in the future.”
He said that unless the retail property market “corrects”, M&S’s focus on building its online operations will accelerate even faster than is planned at present.
M&S chairman Archie Norman took the same view. He said “there are going to have to be some sensible conversations” with landlords.
Rowe pointed out: “Some parts of the store closure programme is because of business rates. We face ongoing challenges in that arena.”
While property owners have so far taken a sympathetic stance towards retailers that have kept them in the loop over planned CVAs, trade body the British Property Federation (BPF) reacted with anger to Next’s demands.
BPF director of real estate policy Ian Fletcher argued in response: “It’s nonsense to suggest that a process designed to try to keep a sinking ship afloat should be applied to healthy businesses.”