Embattled Glasgow-based fashion firm Quiz said on Wednesday it planned to put its stores subsidiary into administration and then buy the business back so it can attempt to renegotiate rental terms.
Quiz shares rose about 4% to around 7p, having collapsed from around 200p two years ago.
In a stock exchange statement, Quiz said: “In order to protect the future for Quiz, the omni-channel fast-fashion brand, the board of the company announces that it is proposing to restructure its standalone retail store portfolio.
“The group’s 82 standalone stores in the United Kingdom and the Republic of Ireland are operated through its wholly owned subsidiary, Kast Retail Limited.
“Kast’s wholly owned subsidiary, Kast International Spain SL, operates the Group’s three stores in Spain.
“The board of Kast has taken the decision to seek the appointment of joint administrators to Kast today.
“The group is proposing to subsequently acquire from Kast (acting through its administrators) the business and certain assets of Kast for a cash consideration of £1.3m funded from the group’s existing cash resources.
“The board believes that the proposed restructuring announced today will enable the group to operate an economically viable store portfolio alongside its online, UK concession and international channels which are unaffected by today’s announcement.
“The group continues to believe that stores, with appropriate property costs and flexible lease terms, can be a relevant pillar in Quiz’s omni-channel model moving forward …
“Although management has been taking proactive actions to address the performance of Quiz’s stores, including renegotiating rents on the expiry of leases, as a result of the above significant challenges Quiz’s stores estate has been loss-making in the last year.
“The enforced closure of Quiz’s stores since March in combination with significant levels of uncertainty going forward about the rate of recovery in consumer demand following the COVID-19 outbreak, has meant that the Kast business is not financially viable in its current structure …
“Subject to the appointment of the administrators to Kast, Zandra Retail Limited, a wholly owned subsidiary of the company, has agreed the terms on which it will acquire from Kast (acting through its administrators) the business and certain assets of Kast for a total cash consideration of £1.3m funded from the group’s existing cash resources …
“None of the leases associated with the standalone stores operated by Kast will transfer to Zandra.
“As part of the acquisition, the employment contracts of 822 of Kast’s 915 employees will transfer to Zandra …”
Quiz CEO Tarak Ramzan said: “It is with deep sadness and regret for some of our colleagues and partners that we had to take this decision to restructure the group’s operations.
“Physical retail in the UK was facing a major structural challenge prior to the outbreak of COVID-19 with the economics of operating stores on traditional leases becoming increasingly difficult.
“Whilst we have taken pro-active actions over the past 18 months to drive footfall to our stores and renegotiate leases to improve performance, the significant economic uncertainty we now face as consumers and businesses emerge from the COVID-19 pandemic has meant that, in order to ensure a sustainable future for the group, we have taken this decision to place the subsidiary which operates our stores into administration.
“We continue to believe that stores, with appropriate property costs and flexible lease terms, can continue to be a relevant pillar in our omni-channel model and we will be seeking to re-open QUIZ stores where we believe it is prudent and economic to do so.
“We believe that with an appropriately structured store estate in combination with our capital light concession model, international channel and online focus Quiz will be better positioned for all its stakeholders over the long-term.”