Carpetright PLC (LON:CPR) is to close 92 stores and cut 300 jobs as part of a drastic restructuring plan aimed at breathing some life back into the struggling flooring retailer.
The company, which employs almost 3,000 people in the UK, is the latest high street chain to seek a company voluntary arrangement (CVA) from its creditors that will allow it to shut its worst-performing stores and reduce the rent on the remaining 113 sites.
READ: Carpetright to seek creditor protection and big cash call to avoid collapse
Creditors, which include the tax man and landlords, will vote on the proposals later this month, while Carpetright will also seek the approval of shareholders shortly after.
“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,” said chief executive Wilf Walsh.
As part of Thursday’s statement, Carpetright – which was founded by Lord Harris of Peckham 30 years ago – unveiled plans to raise £60mln through a share placing.
The cash injection would help to fund the turnaround plans, reduce debts and cover costs associated with the CVA, the firm said.
“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,” added Walsh.
Carpetright also revealed it had identified a “technical breach” of its borrowing criteria and it will ask shareholders to ratify this breach and amend its articles of association to stop such an incident from happening again.
Conditions ‘still challenging’
Last month, Carpetright issued its third profit warning as it blamed weak consumer confidence for a drop-off in sales.
It repeated today that conditions “have remained difficult” since that announcement, adding that it still expects to report a “small” underlying loss for the year to April 28.
Like many retailers, Carpetright has struggled to adapt to changes in the way we shop. Online shopping is becoming increasingly popular which is leaving many high streets deserted.
On top of that, the company – along with its direct rivals – is having to deal with fewer homeowners moving houses, which is typically when they spend big on things like new carpets and curtains.
The brutal combination of above-target inflation and stagnant wage growth also means people are delaying plans to redecorate.
Carpetright shares were down 9.4% to 38p in morning trading in London, although they had fallen as far as 32p earlier in the session.
Most of the high street struggling
As previously mentioned, Carpetright isn’t the only company suffering at the moment.
Bargain Booze owner Conviviality PLC (LON:CVR), Italian restaurant chain Prezzo and value fashion retailer New Look have all gone down the CVA route in a bid to turn around their fortunes, while Jamie Oliver’s Jamie’s Italian business and burger chain Byron have also sought the help of creditors in recent months.
They are the ones that have managed to stay afloat. Toys R Us is to shut all of its UK stores by the end of this month after its US parent company fell into administration earlier this year, while electronics supplier Maplin is now in the hands of administrators after talks to find a buyer collapsed at the end of February.