The new owner of WH Smith’s high street arm is drawing up plans which could result in the closure of nearly a quarter of the stores operated by Hobbycraft, the arts and crafts chain.
Sky News has learnt that Modella Capital, a private investment firm which specialises in taking over troubled retailers, is preparing to launch a company voluntary arrangement (CVA) at Hobbycraft as soon as Wednesday.
People close to the proposals said that nine of its shops would be closed, with the loss of roughly 100 jobs, and that 18 more would remain open only if negotiations with landlords over rent cuts concluded successfully.
A further 97 stores will remain unaffected by the CVA, the people added, protecting 1,800 jobs.
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If the talks with landlords do not progress as envisaged and the 18 affected stores are also earmarked for closure, at least 150 more redundancies could be triggered based on Hobbycraft’s average number of employees per store.
Some job losses are also expected at the company’s head office and distribution operations, according to insiders.
The Hobbycraft CVA is expected to be launched shortly before Modella also pursues a restructuring at The Original Factory Shop (TOFS), the discount chain it acquired just two months ago.
One industry source speculated that as many as between 30 and 40 TOFS outlets could close, resulting in hundreds more layoffs.
The dual restructuring processes will raise questions about whether Modella plans a similar cull of shops and workers at WH Smith, which it has said will be renamed TG Jones following the takeover.
In a statement, a Modella spokesman said: “Modella Capital is absolutely committed to bricks and mortar retail, at a time when the sector is coming under increasing pressure.
“[Modella] understands that high streets provide a vital service to consumers, are an essential source of employment and are key to the future success of local economies.
“Modella Capital believes that many retailers can thrive on the high street; particularly those with a distinctive offer and a loyal customer base.
“Where necessary, Modella Capital has the skills and experience to restructure retailers that require it, in order to ensure they create profitable, ongoing businesses that will continue to serve communities and employ thousands of people across the UK.”
FRP, the professional services firm, is overseeing the Hobbycraft CVA, while Interpath Advisory is working on the equivalent process at TOFS.
CVAs – a widely used tool in the retail and hospitality sectors in recent years – are frequently utilised to facilitate store closures and rent cuts from landlords.
Modella bought Hobbycraft, which was founded in 1995, from the private equity firm Bridgepoint last summer.
Content Source: news.sky.com