Ben Lewis, CEO of River Island, said in a statement that he was ‘pleased’ at the approval of the restructuring plan, which he said comes with a ‘clear transformation strategy’
Major high street chain River Island has announced it will shut dozens of stores – leaving hundreds of people jobless. The move, part of a long-in-the-works “restructuring plan” worked up to prevent the chain from collapsing into administration, will see River Island shutter 33 shops and pay reduced rents on a further 71.
The clothing retailer has secured funding to avoid falling into millions of pounds worth of debt. Landlords are being asked to cut rents for three years and potentially stop payments completely on some sites in a bid to stem losses. Matthew Weaver KC, for River Island, told a hearing on Friday that the company “simply has not been able to reverse” a trend of financial difficulty as the restructuring plan was approved by the High Court in the UK.
In written submissions, he cited a decline in footfall and sales due to “the pressures of a highly competitive and changing retail environment as well as the prevailing trend away from high street retail stores to online shopping”. It comes after Royal Mail made a major delivery rule change from this week for millions of UK homes.
He added: “A number of geopolitical events have also resulted in continuing supply chain disruption which, together with energy, labour and other price increases, has resulted in a cost base that’s too high and unsustainable at its current level.”
After a meeting on August 1, five of the 10 classes of creditors approved the rescue plan, meaning River Island had to gain approval from the High Court to move forward. No one appeared at the court hearing on Friday to oppose the proposals. River Island CEO Ben Lewis hailed the news, saying he was “pleased that River Island’s restructuring plan has been approved by the High Court”.
He added: “We have a clear transformation strategy to ensure the long-term viability of the business, and this decision gives us a strong platform to deliver this. Recent improvements in our fashion offer and shopping experience are starting to show results, and the restructuring plan will enable us to align our store estate to our customers’ needs.
“We are grateful to our suppliers, landlords and other stakeholders for their constructive engagement and shared confidence in River Island’s future.”
River Island has 223 stores across the UK and Ireland although none of the Irish stores are facing closures, Mr Weaver said. In response to recent correspondence from some creditor landlords, Mr Weaver said there “may well be an attempt by those landlords to extract value from the plan company by taking a ransom position”.
He added: “In essence, the transformation plan seeks to address the root causes of the difficulties facing the group and to reposition River Island for long-term success.
“It involves a combination of operational improvements, cost rationalisation and strategic investment, all of which are critical to restoring profitability, improving cash flow, and safeguarding jobs.” Sir Alastair Norris approved the restructuring plan, with a written judgment due at a later date.
River Island employs around 5,500 people and was founded in 1948 under the Lewis and Chelsea Girl brand before being renamed in the 1980s.