New Look has received approval for its retailer rents to be linked to turnover as a part of a deal to safe the struggling vogue chain’s future.
The firm stated its collectors had backed an organization voluntary association (CVA), safeguarding 11,000 jobs.
The settlement implies that its landlords should settle for a share of a store’s income for his or her hire as an alternative of counting on a set lease.
New Look stated the brand new mannequin “reflects the wider retail market”.
Landlords have been keen to renegotiate turnover-linked rents throughout the coronavirus pandemic, as huge areas of the financial system have been compelled to shutdown.
However, New Look’s determination to hyperlink its proposal to a CVA has drawn criticism from the British Property Federation.
“CVAs were designed to be short-term, as part of a wider rescue package, to support businesses in genuine distress,” stated the federation’s chief govt, Melanie Leech.
“We support this rescue culture, but today’s result clearly demonstrates how the process is now wrongfully being used as a weapon by businesses to rip up leases permanently.”
Setting a precedent
New Look – which is present process its second CVA in three years – stated that 402 of its retailers would move to the turnover-linked mannequin.
Rent on these shops will likely be charged at between 2% and 12% of income. Under the CVA, the remaining 68 shops will move to zero hire.
Chloe Collins, senior attire analyst at GlobalData, stated the mannequin would set a precedent for different retailers of their dealings with landlords.
But she warned: “New Look is such a big player in the market and would, upon collapse, have left over 400 empty stores on High Streets and in shopping centres, so smaller retailers must think twice before assuming similar CVAs would be approved, given they may not be as important to landlords.”
During lockdown, the migration from in-store buying to on-line accelerated.
However, New Look’s chief govt, Nigel Oddy, stated the agency “fundamentally” believed its bodily retailers nonetheless had “a significant part to play in the overall retail market”.
He added: “We look forward to working closely with our landlords and all creditors to ensure we can navigate the uncertain times ahead together.”