Up to 150 ex-WHSmith high street stores to close as rescue deal approved
Modella Capital's rescue plan for TG Jones, the rebranded chain of former WH Smith high street stores, has been approved by the High Court. The restructuring will see up to 150 shops close as the business attempts to stabilize following challenging trading conditions.
The company currently operates 451 stores employing 4,700 workers. Modella Capital purchased the high street business last year and rebranded it as TG Jones, though WH Smith travel stores in railway stations and airports were not part of the deal, with the business keeping rights to the historic brand name.
Less than a year after acquisition, Modella announced the radical restructuring plan. As well as store closures, some 120 landlords will receive no rent for up to three years, while rent will be cut on hundreds of other stores by between 15% and 75%.
The High Court heard this week that the retailer was on the brink of insolvency and was facing a cash shortfall of nearly £8m by the end of the week unless the rescue deal was approved. Tom Smith KC for TG Jones told the hearing that the business is "highly distressed and running on fumes at the moment". The business would have run out of cash in April without a £10m loan from Modella and a deferral in liabilities including a large tax bill from HMRC.
Modella blamed the problems on serious underinvestment by the chain's previous owners, with long-term sales having declined. However, it also cited challenging retail conditions and its inability to keep the WH Smith brand name. High inflation, increased online shopping, reduced consumer spending, and higher labour costs have all contributed to the company's difficulties.
The restructuring plan forecasts the business will end up with 302 stores, depending on how many landlords choose to terminate their leases. Mr Justice Hildyard approved the plans after determining the restructuring was fair and creditors would be no worse off than if the retailer entered administration.
TG Jones chief executive Alex Willson welcomed the court's approval, saying the decision "allows us to move ahead with our turnaround strategy" and "makes TG Jones a stronger, more sustainable business".