Select lines up administrators after CVA fails to achieve goals
today Apr 1, 2019
Budget fashion chain Select is reportedly preparing an administration filing, a move that would put 2,000 jobs on the line. The womenswear retailer had already entered a company voluntary arrangement (CVA), which is a form of insolvency, in order to reduce its rent bill and continue operating, but this doesn’t appear to have achieved what owner Cafer Mahiroğlu had hoped.
Mahiroğlu, who had been a Select supplier before buying it out of administration 11 years ago, had been able to ditch loss-making stores when he took over and had an obsessive focus on cost controls. But none of that helped in the current challenging environment.
The Turkish entrepreneur, who back in 2016 had been among the bidders for BHS, has already filed a notice of intention to appoint an administrator. This is a legal vehicle that allows a company a bit of extra time to find working solutions to its problems as creditors are unable to call in debts for 10 working days.
Retail Week reported that the intention notice was filed in the middle of last week and that advisory company Quantuma is waiting to step in to handle the administration process.
Although it’s only April, this year has seen a succession of fashion retailers going into administration with the news about Select coming just as Liam Gallagher’s Pretty Green also goes under.
And it’s not only smaller companies struggling, with ongoing reports that both Debenhams and Arcadia are looking at company voluntary arrangements for their giant operations.
They’re suffering from a wide range of issues whether specific problems like House of Fraser’s administration filing that left Pretty Green owed significant sums, or wider woes like the wrong weather (too hot, too cold, too wet, too dry).
But the fundamental issues are threefold. One is the migration to online that’s making stores much less profitable, while another is the fact that those stores are becoming more expensive to run, despite their lower profitability. Upward rent reviews, higher business property taxes and the higher minimum wage aren’t helping.
And of course, there’s the Brexit effect that’s making consumers ultra-cautious, that’s raising the prospect of higher costs and is also paralysing businesses when it comes to future investment plans.
With analysts predicting that the share of online fashion sales would continue to rise relatively fast, there’s little hope for any relief on that front, although some more Brexit clarity may be available after the planned votes in Parliament this week.
But if, as many in the industry hope, Brexit is either softened or heavily delayed, it will be too late for Select in its present form. The company could live on if a buyer can be found. The problem is that while Mahiroğlu bought it out of administration in 2008 at the height of the global recession, in 2019, fears over another recession and the fundamental issues undermining physical retail could hold other prospective buyers back.
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