New Look has gained approval for its retailer rents to be linked to turnover as a part of a deal to safe the struggling style chain’s future.
The firm mentioned its collectors had backed an organization voluntary association (CVA), safeguarding 11,000 jobs.
The settlement signifies that its landlords must settle for a proportion of a store’s income for his or her hire as an alternative of counting on a hard and fast lease.
New Look mentioned the brand new mannequin “displays the broader retail market”.
Landlords have been prepared to renegotiate turnover-linked rents through the coronavirus pandemic, as huge areas of the economic system have been pressured to shutdown.
However, New Look’s choice to hyperlink its proposal to a CVA has drawn criticism from the British Property Federation.
“CVAs have been designed to be short-term, as a part of a wider rescue package deal, to assist companies in real misery,” mentioned the federation’s chief govt, Melanie Leech.
“We assist this rescue tradition, however at present’s end result clearly demonstrates how the method is now wrongfully getting used as a weapon by companies to tear up leases completely.”
Setting a precedent
New Look – which is present process its second CVA in three years – mentioned that 402 of its outlets would transfer to the turnover-linked mannequin.
Rent on these shops might be charged at between 2% and 12% of income. Under the CVA, the remaining 68 shops will transfer to zero hire.
Chloe Collins, senior attire analyst at GlobalData, mentioned the mannequin would set a precedent for different retailers of their dealings with landlords.
But she warned: “New Look is such an enormous participant out there and would, upon collapse, have left over 400 empty shops on High Streets and in buying centres, so smaller retailers should suppose twice earlier than assuming related CVAs could be authorised, given they will not be as essential to landlords.”
During lockdown, the migration from in-store buying to on-line accelerated.
However, New Look’s chief govt, Nigel Oddy, mentioned the agency “basically” believed its bodily outlets nonetheless had “a major half to play within the total retail market”.
He added: “We sit up for working intently with our landlords and all collectors to make sure we are able to navigate the unsure instances forward collectively.”