The owner of the Monsoon and Accessorize retail chains has delayed plans for a restructuring to rescue the business after landlords failed to back similar plans by Philip Green’s retail empire.
Peter Simon had planned to launch an insolvency procedure known as a company voluntary arrangement (CVA) as early as Friday, which would enable him to reduce the size of his stores and pay less rent.
The procedure, led by the advisory firm Deloitte, which is also acting for Green’s Arcadia Group, is not now expected to go ahead until next week at the earliest as Simon and his advisers continue to negotiate with landlords.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as the coronavirus pandemic. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.
In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit and the coronavirus, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. Many businesses which deal with complex supply chains also want additional help with the new red tape and import charges imposed after Boris Johnson's Brexit deal saddled them with extra costs.
What is the government doing?
In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
Simon, who founded Monsoon as a London market stall in the 1970s, is thought to have offered to pump £34m in new investment into the retail group, which has about 270 shops, in order to keep it afloat. Landlords have also asked for an equity stake in the business.
More than one source said Monsoon had been waiting to see how landlords responded to Arcadia’s CVA before moving ahead and was taking extra precautions before launching its plan.
Monsoon’s business structure means it is less reliant on the backing of landlords, with other creditors including clothing suppliers having a bigger share of the vote, but in other ways its story is seen as similar to that of Green’s empire.
Like the Green family, Simon has taken big dividend payouts from Monsoon over the years. The firm paid £5m to Adena Property, an offshore company he owned, in the year to August 2017. Its holding company also paid his family £116m in dividends between 2008 and 2013.
