High Street faces new blow as some 150 ex-WH Smith stores may close
The high street chain formerly known as WH Smith has secured court approval for a major restructuring, which is expected to lead to the closure of around 150 stores and hit hundreds of jobs. Plans aiming to save the high street chain now known as TG Jones from insolvency were approved by the High Court on Wednesday.
Lawyers for the retailer told a judge on Friday that the company was facing an £8 million shortfall this week if he did not sanction the plans, adding that the company was “highly distressed”. The now-confirmed proposals mean an extra £15 million loan from the company’s owners Modella Capital, on top of £10 million loaned in April, and reduced rates of rent for landlords. Mr Justice Hildyard said: "I am persuaded that it is the jurisdiction of the court to sanction both plans and it is my decision to do so. I did not find this to be an easy matter."
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He said in a written summary that the approved plans are "complex" and "far-reaching in their effect".
He added: "I have had to stand back, and ultimately subjectively assess whether the plans have a realistic prospect of achieving their purpose, or whether, in reality, they are flawed, or more generally, whether the writing was on the wall for retail operations of this kind." He also said: "I propose to sanction the plans."
The chain of high street shops was renamed TG Jones last year after being bought by Modella, while WH Smith kept its group of stores in travel locations.
Tom Smith KC, for TG Jones, said on Friday that the “working assumption” is that around 150 branches will close as a result of the plans, as landlords who do not wish to accept the reduced rate can choose to terminate the lease.
He also said the company has suffered from “long-term sales decline”, exacerbated by high inflation, increased online shopping, reduced consumer spending, with higher labour costs and taxes. The rebranding from WH Smith has also damaged sales, he added.
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In written submissions, he said: "As is well known, the UK retail sector has faced serious trading difficulties in recent years.
"The problems facing the sector have their roots in macroeconomic factors such as high inflation, the shift to online shopping, reduced consumer spending, higher labour costs and increased taxes."
There are around 450 TG Jones stores with 4,700 staff, mostly in the UK.
Following the High Court's decision, Alex Willson, chief executive of TG Jones, said: “We welcome the court’s approval of our restructuring plan. This decision allows us to move ahead with our turnaround strategy.
“The plan protects the substantial core of the store estate and makes TG Jones a stronger, more sustainable business.
“We are incredibly grateful to all the colleagues, partners and stakeholders who engaged constructively throughout the process, and to Modella Capital for its continued financial commitment.”