Paperchase will trade online and through a smaller number of shops following its restructuring through a pre-pack administration announced today.
The retailer is set to sell from about 90 shops rather than the 127 it previously operated, following its move today to appoint PwC as administration and complete its sale to a newly-created holding company, Aspen Phoenix NewCo, backed by Permira Debt Managers. Talks are still ongoing about its concessions – previously the retailer traded from 173 stores and concessions. The news means that about 500 people will lose their jobs, while a further 1,000 jobs will be saved through the deal.
The news comes weeks after Paperchase filed a notice of intention to appoint administrators on January 5, hours after the UK’s third lockdown came into force.
Paperchase chief executive Olly Raeburn says today: “The cumulative impact of lockdowns and related restrictions means the it is imperative we make this tough but necessary decision to safeguard Paperchase’s future.
“In taking this action, we are giving ourselves the best opportunity to ensure that the business is fit for purpose in this new retail environment. We have been in close dialogue with all of our stakeholders through this process and are grateful for their continued support.
“We, of course, recognise that this affects many of our colleagues and we will do all we can to assist them during this difficult time.”
Paperchase had emerged cautiously optimistic from the first 12-week lockdown that started last March and ran until mid-June. It traded profitably in many of its stores and strongly online, but about 40% of its annual sales come in November and December – months in which trading was badly hit as a result of November second lockdowns in England and Wales, followed by Tier 4 restrictions in London, the South East, and parts of Scotland for the rest of December.
The stationery and gifts retailer, ranked Top100 in RXUK Top500 research, previously went through a CVA (company voluntary arrangement) in March 2019 that had linked rents to turnover.
Today’s deal comes in the week that Debenhams was bought out of administration by Boohoo Group, which says the brand’s future will be as an online marketplace. Paperchase example is being held up as an example of how omnichannel retailers can continue to make stores work for them.
Commenting, Payal Hindocha retail analyst at technology and data company Emarsys, says: “In a week of doom and gloom for Britain’s high streets, the news that Paperchase has been rescued by private equity giant Permira comes as some much-needed good news for retailers and consumers alike.
“While it’s clear that high street stores have struggled in the face of Covid-19, there is still significant demand among UK consumers for in-store shopping.”
New research from Emarsys suggests that 74% of UK consumers miss the in-store shopping experience.
Hindocha adds: “Clearly, many consumers do still want to shop in store, it’s simply that they can’t during lockdown. As such, a lot of the pressure currently surrounding the high street is artificial, and may not last in the long term. In fact, most retail businesses still make the majority of their profits in store, with only 31% of retail being conducted online (when stores are open).
“It’s this ongoing demand from shoppers which may have played a vital role in Permira’s decision to keep Paperchase alive both online and on the high street.”