THE future of a major discount chain with 187 shops is uncertain with hundreds of jobs reportedly at risk.
Modella Capital, the new owner of the Original Factory Shop, has drawn up plans to renegotiate rents at 88 of the company’s 178 stores, according to Sky News.
1
The proposals are contained in a company voluntary arrangement (CVA), a last-ditch restructuring process, which was launched on Thursday.
A CVA is a way of restructuring that means a business can continue trading by negotiating its debts, such as cutting rent costs with landlords.
It is a common way for struggling businesses to try and stay afloat, with chains such as Caffe Nero and Body Shop having previously entered into one.
The Original Factory Shop staff are said to have been briefed on the plans.
The move has placed uncertainty over the chain’s portfolio of 187 high street stores, with the outlet previously adding it could lead to “significant” closures and job losses.
It employs about 2,000 people, with a proportion of its 176 head office and warehouse employees understood to be facing redundancy.
Creditors will be asked to vote on the plans at a meeting in mid-May.
Earlier this week, Hobbycraft, also owned by private equity firm Modella Capital, revealed plans to shut at least nine stores across the UK.
The firm is implementing the closures as part of a sweeping restructure announced on Tuesday.
The retailer said the nine stores will stop trading by mid-July, affecting between 72 and 126 jobs.
In addition to the store closures, Hobbycraft announced that the restructuring will lead to redundancies at its Bournemouth head office and its distribution centre in Burton-on-Trent.
It added that the future of “a number of other stores” is still being reviewed.
It comes just two months after the private equity firm bought The Original Factory Shop.
Duke Street Capital, which had owned the company since 2007, attempted to offload the business in 2023 through Deloitte, but a deal never came to fruition.
While many bargain stores such as B&M and Home Bargains have seemed to profit from the cost of living crisis, The Original Factory Shop has struggled to stay afloat.
The retailer has shuttered more than a dozen stores over the past 12 months, including sites in Great Harwood in Lancashire and Invergordon, Scotland.
But despite the closures, the retail chain also opened 27 stores in 2024 and still has plans to continue its “store transformation” programme this year.
Modella Capital also recently snapped up WH Smith’s highstreet arm in a bombshell £76 million deal that will see the beloved brand disappear from British highstreets forever.
All remaining stores will eventually be rebranded as TGJones.
Chief exec Carl Cowling said it was a “pivotal move” that would allow the 232-year-old company to focus solely on its travel business.
When approached for comment, a spokesperson for Modella Capital said: “In response to the challenging retail environment of the last year, The Original Factory Shop (TOFS) has today (24 April 2025) announced a proposed Company Voluntary Arrangement (CVA) in order to protect the future of TOFS as a business and to allow it to flourish in the future.
“Under TOFS’ plan, which will be subject to a vote by the company’s creditors on 14 May 2025, TOFS will adjust its store estate (by, where possible, renegotiating the leases on a number of its stores that are loss-making), return to the deal-centric stock and purchasing strategy it is famous for, invest in online channels, and re-align its support centre and logistics operations.
“All employees have been informed of the CVA proposal.
“A redundancy consultation will begin with employees in those TOFS stores where the company is seeking to renegotiate the lease, in the event that those negotiations are not successful.
“There will also be a reduction in the number of employees in the company’s Head Office and Warehouse in Burnley.
“There will be no change in the day-to-day running of the business while this plan is implemented, and management will keep all TOFS colleagues updated as the process continues.
“While these changes are necessary, TOFS remains committed to serving our loyal customers across the UK.
“Our plan aims to put the business on sustainable footing, protecting as many jobs as possible, and allowing us to return to offering the exceptional value and deals our customers expect from us.”
RETAIL PAIN IN 2025
The British Retail Consortium has predicted that the Treasury’s hike to employer NICs will cost the retail sector £2.3billion.
Research by the British Chambers of Commerce shows that more than half of companies plan to raise prices by early April.
A survey of more than 4,800 firms found that 55% expect prices to increase in the next three months, up from 39% in a similar poll conducted in the latter half of 2024.
Three-quarters of companies cited the cost of employing people as their primary financial pressure.
The Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
Professor Bamfield has also warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”