One of Britain’s most well-known fashion giants reportedly faces collapse within weeks unless a radical 11th hour rescue deal can be agreed.
Hundreds of jobs at River Island are now hanging in the balance as the struggling high street retailer battles for survival following a slump in trading.
In an attempt to save the fashion chain from shutting up shop, bosses have proposed a plan to hand the keys back on 33 stores.
As part of the rescue deal, the company aims to try and slash rents on a further 71 shops and write off a series of debts to stave off a severe liquidity crisis.
The sweeping proposals – put together by accountancy firm PwC, which is advising the retailer – will be put to the High Court next week.
Should it receive the blessing of three quarters of the company’s creditors, it will unlock an emergency loan from River Island’s billionaire founders, the Lewis family, to help the struggling retailer to pay its bills.
However, if the proposal is rejected, it could plunge River Island into an irreversible financial crisis which will see it run out of cash by the end of August, leaving it ‘unable to pay its debts as they fall due’, the company has reportedly told creditors.
According to the Telegraph, in a stark warning laid out in the restructuring plan, River Island ‘will not be able to continue trading as a going concern’ and ‘would be subject to administration or other insolvency proceedings’.
A High street chain is planning to shut 33 stores, with 71 more at risk, putting thousands of jobs on the line. Pictured: file image
The chain is set to close 33 of its UK stores, putting hundreds of jobs at risk as part of a major restructuring plan, according to reports. Pictured: stock image
An 800-page report compiled by the retailer’s advisers, PwC, reveals the fashion house faces a £10million ‘funding need’ in the second week of September, which financial experts warn will skyrocket to £50million before Christmas.
PwC must now convince at least 75 per cent of River Island’s creditors to support is bail out proposal.
The plan would allow the fashion giant to walk away from a string of debts, including tens of millions of pounds owed landlords from outstanding debts.
Among those landlord affected by the restructuring deal are British Land, the Crown Estate and Mike Ashley’s Frasers Groups. Councils nationwide would also be on the list.
However, industry sources have said there is resistance to the plan, with insiders accusing River Island of expanding too much.
‘This is family-run, they’ve just overstretched, and it’s unfair that the landlords will struggle because they haven’t maintained their relevance,’ one landlord told the Telegraph.
Bosses at the company blamed the closures on the ‘migration of shoppers from the High Street to online’ and higher costs to run stores.
The family-owned retailer confirmed it is proposing to close 33 of its 230 stores by January next year as a result.
River Island reportedly faces collapse in a matter of weeks if a rescue deal is not backed by its creditors (file image)
A River Island spokesman told MailOnline: ‘River Island circulated its proposals for a Restructuring Plan to creditors on June 20th. In combination with the company’s ongoing transformation strategy, the plan is a proactive measure to place the company on a firm footing.
‘We have been having positive conversations with key stakeholders and are confident that we will achieve approval of the Plan in the next few weeks.’
River Island, which employs around 5,500 people, was founded in 1948 under the Lewis and Chelsea Girl brand before rebranding in the 1980s.
It is now headed up by CEO Ben Lewis, the nephew of its founder, who took over his second stint as the head of the family firm in February.
He previously held the position for almost a decade before stepping down in 2019.
Ben Lewis, chief executive of River Island, previously said: ‘River Island is a much-loved retailer, with a decades-long history on the British High Street.
‘However, the well-documented migration of shoppers from the high street to online has left the business with a large portfolio of stores that is no longer aligned to our customers’ needs.
‘The sharp rise in the cost of doing business over the last few years has only added to the financial burden.
‘We have a clear strategy to transform the business to ensure its long-term viability.
‘Recent improvements in our fashion offer and in-store shopping experience are already showing very positive results, but it is only with a restructuring plan that we will be able to see this strategy through and secure River Island’s future as a profitable retail business.
‘We regret any job losses as a result of store closures, and we will try to keep these to a minimum.’
The high street giant is among several fashion chains hit hard by weaker consumer spending and fierce competition from cheaper online rivals like Shein.
In its latest accounts, River Island reported a £33.2million loss for 2023, with sales down 19 per cent, highlighting the challenging trading environment.
River Island and PwC has been contacted for comment.
In January, the firm introduced a redundancy programme at its London head office in a bid to save money in the context of increasingly pressured finances.
The job cuts affected a range of employees across buying, merchandising and HR, but the total number of losses was not confirmed by the retailer.
Company accounts showed the company was £33.2million in the red for the 12 months to December 30, 2023.
It also suffered a 15 per cent decline in sales and a 19 per cent fall in turnover.
The year before, River Island had a total profit of £7.5million.
