No Way to Dress up a Company’s Struggles: Monsoon Accessorize still in a critical condition

November 5, 2019

2 min read

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What's going on here?

Despite Monsoon Accessorize’s company voluntary arrangement (CVA) being approved in July, accounts filed at Companies House show that the company is still in critical condition. The CVA will see rent reductions taking place for 135 of their 258 UK stores.

What does this mean?

A CVA is a statutory agreement negotiated between an insolvent limited company (a company unable to pay its debts) and its creditors (those who are owed money from it) on how and when to repay its debt. 

High street fashion chain Monsoon Accessorize said that trading has been “extremely difficult” since 2018 due to “depressed consumer spending”. It also saw “slower growth in online sales” and a continued decline in retail sales. 

Following Monsoon’s CVA, its founder Peter Simon, conditionally committed £30 million in loans (of which £12 million is being used as working capital) to keep the business afloat. However, management forecasts predict that revenue targets will not be met and covenants are expected to be breached. Should this happen, it will be up to Simon as to whether to hand over the remaining £18 million, renegotiate a new loan deal, or let the retailer collapse. There is some cause for optimism for creditors and consumers however given the chain posted positive earnings for the 2019 full-year and performed ahead of forecasts for the first month of the financial year.

What's the big picture effect?

The collapse of retail on the British high-street has been an inescapable phenomenon in recent years. Since last year, the British Retail Consortium estimates that 85,000 jobs have been lost as shoppers increasingly turn to the web to make purchases. Further, research done by Lloyds Bank Commercial Banking has shown that 55% of large retailers have recognised the trend that shops are “increasingly places shoppers go to browse before making a purchase online” by reducing their high street costs. 

High street collapses in early 2019 such as Patisserie Valerie and Office Outlet (formerly Staples) indicated that 2019 would be another difficult year for the business on the ground. The situation is exacerbated by Brexit uncertainty, as September saw the lowest lifestyle sales since the height of the recession in 2008. The recent collapse of Thomas Cook (for more information see our article on that here) combined with this tightening of purse strings reportedly “unnerved the shopper” and contributed to a lack of discretionary spending. 

In an attempt to encourage spending, High Streets Minister Jack Berry, committed £1 billion of government spending to the Future High Streets Fund. This investment will provide free spaces for community groups in town centres as part of the Open Doors Scheme in a bid to revolutionise high streets. However, the question remains as to whether this will be enough to save the High Street.

Report written by Heerim Hwang

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