Flooring retailer Carpetright announced on Thursday that it plans to close at least 92 stores and raise approximately £60m to restructure the business and avoid going into administration.
The company, which has seen its shares
fall 81% since the start of the year as it issued a series of profit warnings, said it would implement a company voluntary arrangement (CVA) to free itself of its poorly-located sites. The CVA will only cover landlords and no other creditors.
Trading conditions since the last announcement on 1 March have remained difficult but in line with previous guidance, the company said, with management still expecting to report a small underlying pre-tax loss for the year to 28 April.
Out of the total 400 shops across the UK, 205 have been identified as underperforming and/or on poor terms. Of those, it will close 92 and the rest will be subject to a reduction of rental costs and revised lease terms. Approximately 300 redundancies are expected from the move.
The firm said it will seek creditor approval at a meeting on 26 April to allow the outlet closures in a company voluntary arrangement (CVA). It will also have to seek shareholder approval on 30 April.
Carpetright's chief executive Wilf Walsh said on Thursday: "These tough but necessary actions will enable us to address the burden of a legacy UK property estate consisting of too many poorly located stores on unsustainable rents and are essential if we are to restore our profitability and deliver a successful turnaround."
"Completion of the CVA and equity financing will enable us to establish an appropriately-sized estate of modernised stores, on economic rents, complemented with a compelling online offer, enabling Carpetright to address the competitive threat from a position of strength," he added.
In addition the company expects to raise c£60m in equity capital via a placing and open offer to fund the on-going strategy and reduce indebtedness and cover the costs associated with the CVA. The raise is expected to be launched on or around 18 May 2018.
Many retailers in the UK are facing similar situations with the recent closure of all Toys R' Us stores, Maplin going into administration and New Look, Jamie's Italian, Prezzo and Byron all seeking similar CVA arrangements.
Broker Numis said it saw Carpetright's CVA as a "progressive" move in relation to the medium-term prospects for the business.