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Select parent files for CVA

Genus UK, which owns fashion chain Select, has appointed business advisory firm Quantuma to advise on proposals for a company voluntary arrangement (CVA).

Details of the proposals, seen by Drapers, show that the retailer has divided its 183 stores into four categories based on performance.

Under the plan, owners of 25 of its stores would receive 25% rent, but no rent would be payable to them during a “rent free period”.

Select would pay 81 landlords 70% of rent owed, and 50% to 27 landlords. Only the chain’s top 50 stores would remain unaffected by the process, although these will switch to monthly payments, rather than quarterly.

A CVA process traditionally results in store closures. However, Select boss Cafer Mahiroglu told Drapers that the retailer is simply seeking rent reductions, adding: “We are not closing any stores or making any redundancies.”

The proposals aim to “preserve the employment” of all 1,618 store staff and 132 head office employees.

Genus UK said that since entering the Christmas trading period, sales have been hit by “reduced levels of consumer confidence and spending”, as well as rises in fixed costs and shifting value of the pound against the dollar.

It said: “In the last six months it became apparent that the trading performance of the company was significantly poorer than in previous years, due to a difficult trading environment.

“It was also clear that a number of stores were over-rented, in relation to which the company continued to make significant losses.”

The company’s turnover is valued at £80m. Its creditors will vote on the CVA proposal on 13 April.

Genus UK has appointed Andrew Andronikou, Andrew Lawrence Hosking and Carl Stuart Jackson of Quantuma to oversee the process.

Andrew Andronikou, a partner at Quantuma, said: “The overinflated rent and rate roll have finally made it untenable for shopkeepers to trade. Brexit has made a significant contribution to eroding margins, so the combination [of falling] sales has destroyed the profitability of many of these retailers.

“Furthermore, as now the CVA has been adopted by many high street retailers, a scenario has developed where those that have adopted the CVA and rationalised rent rolls have a significant advantage on those who haven’t, so many retailers are following suit.”

The news comes after New Look’s creditors approved a CVA process last week, resulting in 60 store closes and nearly 1,000 job cuts.

Genus UK made a loss of £1.6m in the year to 4 June 2016, compared with £701,000 profit made in the previous year. Its average monthly staff count at the time was 1,693.

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