UK lockdowns push Paperchase to verge of administration
The cards and stationery retailer Paperchase is on the brink of administration after pre-Christmas store closures put an “unbearable strain” on the high street, putting 1,500 jobs at risk.
The company, which has 173 stores and concessions, has filed a notice to appoint administrators as it tries to put together a rescue. The legal document provides protection from creditors for 10 days.
Paperchase was particularly vulnerable to the sales disruption caused by lockdowns in the run-up to Christmas as 40% of the chain’s annual sales are rung up in November and December. New restrictions mean all its UK stores are once again closed, in line with other non-essential retail outlets.
A spokesman for Paperchase said the cumulative effect of multiple lockdowns, including the loss of crucial Christmas trade in November, had put “unbearable strain on retail businesses across the country”.
Paperchase, he said, was not immune to the tough backdrop, despite strong online sales. “Out of lockdown we’ve traded well, but as the country faces further restrictions for some months to come, we have to find a sustainable future for Paperchase.”
The spokesman added that the company was “working hard to find that solution” with the administration notice a “necessary part of this work”. The accountancy firm PwC has been lined up to handle the process.
“This is not the situation we wanted to be in,” the Paperchase spokesman added. “Our team has been fantastic throughout this year and we cannot thank them enough for their support.”
The company was founded in 1968 by art students Judith Cash and Eddie Pond, who opened a store in London’s Kensington. The company has changed hands numerous times, with high street rival WH Smith and now defunct US books giant Borders among the chain’s previous owners.
In 2010 the private equity firm Primary Capital backed a £20m management buyout from Borders. Primary Capital, which had also owned Yo Sushi and Coffee Nation, tried to sell Paperchase in 2014 and considered a stock market flotation two years later.
In 2019 Paperchase used an insolvency process known as a company voluntary arrangement (CVA) to cull unprofitable stores and cut rents. It blamed its financial problems on a decline in customer numbers coupled with rising costs. The CVA switched some of its stores to turnover-based rents, meaning the firm is not as burdened with property costs as some retail chains.
The last set of accounts show the retailer making a loss of £11m on sales of £125m in the year to February 2019.
Source: Read Full Article