Monsoon seeks CVA to stay afloat.

Monday 24th June 2019. – updated 04/07/19.

Update 04/07/19 – Monsoon Accessorize granted rent cuts

Creditors at Monsoon Accessorize have approved the retailer’s company voluntary arrangement, which asked for rent reductions of up to 65% at nearly two-thirds of its stores, as the chain strives to stay afloat amid critical high street conditions.

The fashion and accessories group confirmed that its CVA proposal had passed “with a majority significantly above the required threshold,” with rents now set to be reduced by 25%-65% at 135 of its 258 stores for up to three years.

In exchange for the rent cuts, the retail business has offered creditors participation in a £10m annual profit-sharing scheme, provided that profits can recover.

Chief executive Paul Allen says the action will allow the chain to “reshape [the] business for the future,” as the rise of online commerce renders high street retailers’ steep rent and wage costs increasingly difficult to sustain.

Retailers unable to afford rents amid sector crisis

Monsoon’s CVA announcement makes the chain the latest of many major UK retailers to resort to the insolvency procedure, as trading conditions for the sector remain difficult.

In addition to high rent and wage costs and disruption from online retailers, high street firms have faced waning consumer confidence and sales declines due to bad weather this year, with Easter sales markedly down due to storms.

Putting forward its CVA proposals in June, Monsoon stated that its current rent costs had become “unaffordable” due to the challenges facing the British high street.

In the last two years, the retailer has closed nearly 40 stores, with other locations relocated and downsized in a bid to streamline overheads.

Earlier this year, Monsoon Accessorize founder Peter Simon provided the company with a secured £12m emergency credit facility, pledging a further £18m set to be supplied at 0% interest “conditional upon the CVAs passing.”

Revo says retail CVAs are “damaging” businesses

Some say using insolvency procedures to tackle rising rent costs provides businesses with a real chance of recovering from financial difficulty – but others criticise the ‘misuse’ of the procedures, warning of the knock-on effects of forcing landlords and others to shoulder the burden of a struggling physical retail market.

Speaking after Monsoon’s CVA announcement, landlord representative Revo said that it “continue[d] to call on the Government to intervene and scrutinise how CVAs are being used by some retailers and ensure the legislation is fit for purpose in this new trading environment.”

Revo added:

“The frequency of retailer CVAs and the growing number of stores and jobs affected risks further damage to our high streets and town centres, local authorities and pension fund investors, as well as other retailers left at a competitive disadvantage.”

Original 24th June Article

Monsoon Accessorize has asked its landlords to approve reduced rent costs at approximately two thirds of the company’s stores in exchange for a share of £10m in future profits, as the British retail chain struggles to remain afloat.

The retailer, which operates 271 stores across the UK, has proposed two separate CVAs since April in a bid to facilitate a major restructuring of its finances.

The arrangements would entail significantly reducing rent costs at the majority of Monsoon Accessorize’s stores, enabling the company to avoid any store closures, whilst also protecting its workforce of 4,400 staff from job losses.

Trading conditions have been difficult for the retailer amid broader challenges faced by the high street, with many businesses feeling the impact of waning sales, high rent and wage costs and disruption from online retailers.

Managers for the company have acknowledged that the rising costs of both rents and business rates are “now unaffordable “ for Monsoon Accessorize, due to “fundamental changes in retail.”

In 2017, Monsoon Accessorize reported losses of £10.5m before tax in 2017 on sales of nearly £424m, with the most recent figures showing losses of £3.1m on sales of £300m.

The retailer received an emergency loan of £12m from founder Peter Simon this year, with a further £18m promised at 0% interest if the CVA is approved by the business’ creditors.

Mr. Simon says the company has faced “significant pressure” on working capital as a result of the removal of trade credit insurance, which has forced the business to pay its suppliers up front.

 

CVA deals “never easy” for landlords

Monsoon’s bid for a CVA comes just days after high street giant the Arcadia Group secured a similar arrangement in order to stay operational.

The use of CVAs by major high street businesses has been criticised by many commercial property landlords, who are often made to bear the financial burden of lower rent income in order to keep tenants afloat.

In the last two years, retailers and restaurant chains including New Look, Debenhams, Mothercare, Giraffe and Byron have reached CVA deals with the backing of their creditors.

Resistance to striking deals has grown amongst landlords as more and more businesses fall into financial distress.

In Monsoon’s case, founder Mr. Simon has so far rejected calls from landlords for an equity stake in the business.

The British Property Federation notes that the decision to approve a CVA is “never easy” for landlords, as property owners “need to take into consideration the impact on their investors, including those protecting pensioners’ savings via investment into property.”

High street distress set to worsen

Conditions for UK retailers have only continued to worsen in recent months, with data from the Office for National Statistics showing a 0.5% decrease in retail sales between April and May.

The three months to May 2019 saw retail sales expand by just 1.6% compared with the previous quarter.

Department store businesses saw a dip in trade as sales fell 0.9% in the three months to May, with many of those burdened with high rent costs on large, prime location sites struggling to offset waning profits.

Across retail businesses, clothing and footwear sales dropped by 4.5%, marking the biggest quarterly drop since 2015.

Analysts have attributed the steep decline in summer clothing sales to “unseasonably cold weather” conditions in May.

However, more pernicious problems – including e-commerce competition, waning consumer confidence, political uncertainty and rising cost burdens – continue to plague businesses on the high street.

Against this backdrop, PWC’s Lisa Hooker warns that a surge in discount offers from businesses will only provide a “short term fillip” to sales, with “the consequent market erosion” pointing to “even more high street distress in the rest of 2019.”

See last weeks post on the rise of CVAs in retail

Retail suffering

Earlier this month we reported that retail sales suffered their worst month in 24 years. UK shoppers shunned the high street last month leading to sales plunging in May faster than at any time in the past 24 years, new data shows.

Sales dropped 2.7% in the four weeks to May 25 compared with a month earlier, according to the British Retail Consortium-KPMG Retail Sales Monitor, making it the biggest fall since records began in January 1995.

Helen Dickinson, the BRC’s chief executive said: “With the biggest decline in retail sales on record, the risk of further job losses and store closures will only increase. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the government is failing to act.”

UK High street struggling

We are seeing the UK high street having one of the worst periods in its history.

2018 emerged as one of the most challenging years for British physical retailers in recent history.

As consumers increasingly shop online and physical retailers see the costs of rent, wages and business rates rise, many businesses have struggled to stay afloat. Nearly 85,000 jobs were lost in the UK retail sector last year, with 1,000 retail companies going into administration in the first nine months of 2018 alone.

As a reminder of how bad it is getting, just look at the long list of  stories about retailers we have posted in recent months:-

Boots to close 200 stores as High Street crisis continues.

Luxury chocolate retailer Rococo collapses into administration

Fashion retailer Select falls into administration:updated 29/5/19

Jamie Oliver restaurant chain collapses into administration: updated 28/5/19.

Thomas Cook secures extra funding as financial woes worsen

Retailers seek online sales tax amid high street crisis

Cotswold Outdoor has CVA application approved

Folli Follie mulls Links of London sale amid charges

Arcadia gets HSBC backing for supply chain

Monsoon Accessorize pursue CVA

UK store closures at a record high

Debenhams in administration

Fashion chain Select to enter administration

Office Outlet enters administration

Patisserie Valerie’s accounting black hole grows

LK Bennett set to file for administration

The  UK’s high street and only adds to the evidence that UK retail is under extreme pressure at the moment. Although all of UK plc appears to be having difficulties

more retail CVAs predicted

Begbies Traynor shows UK companies are in significant financial distress

KPMG give Zombie company warning

UK shop vacancies reach four year high

The concerning figures published by the ONS and Ordnance Survey combine with recent reports that store vacancies are on the rise in town centres across the UK.

According to the British Retail Consortium vacancies monitor, high street vacancy rates reached a four year high of 10.2% in April 2019.

The figure marks a 9.9% increase from the previous quarter — with the number of store vacancies having risen continuously in each of the last four quarters.

Beyond reflecting the ongoing market challenges faced by high street businesses, BRC head Helen Dickinson says the record number of store vacancies could also serve to worsen the situation for firms.

“Empty shopfronts, particularly for larger stores, can deter shoppers from an area. This effect can be cyclical, with the long-term decline in footfall pushing up vacancy rates, particularly in poorer areas,” Dickinson notes.

Retail footfall hits six-year low

A monthly footfall tracker from the British Retail Consortium (BRC) and Springboard shows that store visits touched a six-year low in May, with a 3.5% decline the worst since January 2013.

The dip has been attributed to a number of factors, including poor weather, political uncertainty and competition from online shopping.

BRC chief executive Helen Dickinson notes that the report shows declines in every region and across high streets, retail parks and shopping centres, commenting: “This reflects our recent sales data, which showed the largest drop in retail sales on record.”

Cashless concern also hitting retail.

The Mail on Sunday’s Toby Walne says “countless” small businesses have been caught up in moves towards Britain becoming a cashless society, citing a business owner who bemoans the fact that “every time someone pays using a card a small amount of money is taken by the bank as a charge earned by my business.”

Mike Cherry, chairman of the Federation of Small Businesses, says many businesses share in this, with shops being pressured to install contactless card readers. He warns: “If cash disappears there is a danger card and contactless payment fees will soar without competition,” adding: “It would be devastating.”

High street employment up, but retail roles dip

In separate news for the high street, figures from the Office for National Statistics show that employment in high street businesses rose to almost 3m in 2017, up 10% from 2012.

In the period, retail employment on the high street fell by 26,000 to 926,000, while the number of staff working in accommodation and food service activities on high streets rose to at least 130,000, a climb of more than 30%.

Services industries, such as estate agencies and solicitors, saw an increase of 14%, adding a net 180,000 jobs.

Retail job prospects low amid high street crisis

A new report from the Office of National Statistics warns that Britain’s high streets are in a “period of change.”

The study published by the ONS cites widespread “anxiety about how high streets will develop in the future,” and “worries about the decline of retail on the high street,” stemming from “the closure of branches of retailers across many high streets.”

As consumers are increasingly attracted by e-commerce, physical retail businesses have suffered from dwindling profits due to a decrease in footfall and sales, whilst simultaneously facing higher cost burdens due to wage, rent and tax increases.

Joint figures published by the ONS and Ordnance Survey show that the number of jobs in the retail sector fell in every region of Britain except for London in the five years from 2012-2017.

Significant declines in retail jobs were seen in Wales (10%), Scotland (8.6%) and Yorkshire (7%) in particular.

Overall, the number of businesses on the high street increased by 15% between 2012-17, – an increase which lagged behind a 22% rise in businesses in non-high street areas. The total number of retail businesses however dropped by 2%.

However the consumer should be stronger than ever.

All the woe on the high street is against a back drop of a UK consumer that should be doing strongly.

The UK unemployment rate held its near-record low of 3.8% in the three months to April, according to statistics from the Office for National Statistics, as the jobs market brushed off the continuing Brexit uncertainty.

Wages rose 3.4% in the quarter and Britain’s unemployment rate has not been lower since the end of 1974.

ONS deputy head of labour market statistics Matt Hughes said: “With employment growth among women coming from full-timers, the overall gap between men and women in hours worked is now the lowest ever.”

John Hawksworth, of PwC, commented: “The UK economy has been a great job-creating machine over the past seven years and employment continued to rise over the past three months.” Howard Archer, chief economic adviser to the EY Item Club, warned that the labour market “is not showing the same degree of strength that was apparent at the start of the year”.

All this should mean consumers have extra cash to spend on the high street but yet the woe continues.

Online retailers like those named after a famous South American river are obviously part of the problem.

Consumers are also confirmed about macro events like Brexit.

Concern is even expressed over future employment with many of those employed not feeling secure in their position.

A report from KPMG and Harvey Nash forecasts the impact artificial intelligence will have on the jobs market, suggesting more than a fifth of roles will be overtaken by computers in the next five years. A survey of more than 4,000 technology leaders saw most respondents say that at least 10% of the workforce would be replaced by automated roles, with a third saying the rate would be 20%.

“Concerted action” needed to avoid “catastrophic” impact

All the data suggests that the situation for physical retailers is set to continue worsening before it improves, with consumer disruption leading to dwindling sales.

Despite hoping to see a boost from a late Easter in 2019, retailers nonetheless saw the number of shoppers fall by 0.5% year-on-year in April.

In addition, figures from BDO show that high street sales saw a year-on-year decrease of 3.3% in May – marking the worst May performance on record.

Online sales meanwhile rose by 19.8% – underlining that the threat posed to physical businesses by e-commerce is still growing.

As a number of major high street retail businesses including Debenhams and the Arcadia Group seek restructuring deals to close physical stores and slash rent prices in order to avoid collapse, analysts say that urgent government action must be taken to avoid further losses.

Noting that high street businesses are “creaking at seams,” BDO’s Sophie Michael warns:

“It is vital that the ambivalence with which the high street is currently being treated is replaced with concerted action, or the results could be catastrophic.”

Are you owed money by a retailer?

With pressures on the high street it is essential that you stay on top of the credit limits you grant retailers and watch carefully for any late payments.

You can’t just assume your customers can and will pay you, no matter how big their name is.

It is essential to have credit management systems in place to monitor and check your customers credit worthiness.

It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.

See the section below – About CPA.

If you are also struggling, do you realise you could be sitting on a fortune?

Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.

If you are struggling like the above retailers and sold B2B on credit then there may be a hidden source of capital you can call on.

If you need extra capital, rather than shutting down or jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.

Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.

We can help you uncover the pile of gold, you didn’t even know you were sitting on.

If you trade with other businesses and were often paid late then you could be entitled to significant compensation.

Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.

Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.

You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.

That compensation could be the cash rescue your business needed.

But don’t delay, that compensation evaporates if not claimed within six years of the late payment.

How can CPA help?

CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.

We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.

Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.

CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.

The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit.  You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.

We do the work, you receive the cash.

If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.

We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.

We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.

 

CPA is passionate about late payment

The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.

We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.

If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.

As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.

Under little used legislation, you are entitled to compensation for those late payments.

Now you can boost your own cash-flow.

CPA can help unearth the those hidden treasures.

We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.

Yes, CPA can help you boost your business cashflow.

Don’t let your bankers control you, contact CPA today.

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply big retailers or small ones, help us help you identify the risks.

Why use a third party collector?

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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