Putting an end to the speculation and escalating worries, it was announced yesterday (Monday 4 March) that Paperchase is launching a CVA (Company Voluntary Agreement) which, if successful, is likely to result in reducing its rental costs and the shutting “a small number” of its stores.
The CVA proposal, which is scheduled for a vote on 22 March, will need to be approved by over 75% of creditors for it to be put into action.
News that Paperchase had appointed KPMG in January to explore different possible options for the design-led retailer sent shockwaves through the greeting card industry, not only as the multiple is an important retail stockist for many card publishers, but as it has also be long held up as a beacon for greeting card and stationery retailing, renowned the world over.
Summing up the predicament in which the chain finds itself, Paperchase chief executive Duncan Gibson said that despite the retailer being a much-loved brand, with a loyal customer base and a fantastic design-led product offer, he highlighted that the business needs “to reshape” its store estate “in order to ensure a long-term, sustainable future.”
Explaining the rationale for pursuing a CVA, in a statement published by Retail Week Duncan said: “We have decided to take decisive action now to ensure we’re able to succeed in the future. We believe this is in the best interests of the company, our people, creditors and our customers.”
There news, Retail Week said that under the CVA up to 28 of Paperchase’s 150 stores would have rents cut by half for three-months, after which stores would either be shut or continue to operate for a rent-free period.
Timothy Melgund, deputy chairman of Paperchase has been vocal in his reassurance that the business’ plight is in no way reflective of a drop off of greeting card purchasing, in fact quite the opposite.
Under the CVA, the bulk of the retailer’s stores will continue to trade, with hopefully over 50% receiving rent reductions.
Although a CVA was mooted back in January, as the weeks have progressed, supplying card publishers have become increasingly worried that Paperchase would be sold or, even worse, be forced into administrative receivership.
As one publisher told PG Buzz: “A CVA is not ideal, but it really is a ‘least worst’ scenario given the other possible outcomes.”
Top: Paperchase is going for a CVA.