Caffe Nero on the brink of insolvency: Coffee chain blames second lockdown as it becomes latest High Street victim of pandemic
- The coffee chain was forced to put itself into a Company Voluntary Arrangement
- Founder Gerry Ford, 62, said second lockdown had pushed the company to act
- He now hopes to renegotiate rent agreements with landlords and reduce costs
- Caffe Nero was forced to shut down for several months during the first lockdown
The coffee chain was last night forced to put itself into a Company Voluntary Arrangement, a type of insolvency that allows firms to continue trading while they attempt to get their finances in order.
Founder Gerry Ford, 62, said the second lockdown had pushed the company to act. The chain has suffered from curbs on socialising, fewer shoppers in town centres and the government advice for workers to stay away from their offices.
Mr Ford, who set up the business in 1997, has appointed leading accountants KPMG to advise on the CVA.
Caffe Nero (store pictured) has become the latest high-profile business casualty of the Covid-19 pandemic – with the second national lockdown being blamed for its plight (file photo)
His hope is that he will now be able to renegotiate rent agreements with landlords and reduce costs, which would enable the company to rebuild its business when the pandemic ends.
Caffe Nero was forced to shut down completely for several months during the first lockdown and is now able to offer takeaways only.
It employs more than 6,000 people in 800 stores in the UK but said it hopes closures and job losses will be minimal.
Many of its outlets are situated in town and city centres and in transport hubs, meaning it has lost vast amounts of custom due to people working from home.
‘With our dine-in facilities now closed for a second time, we have little option but to launch this CVA to safeguard the future of our business,’ Mr Ford said last night.
Prior to the pandemic the chain had been trading strongly, with a long unbroken record of growth in sales, he said.
Founder Gerry Ford (pictured), 62, said the second lockdown had pushed the company to act. He has appointed leading accountants KPMG to advise on the CVA
‘However, like so many businesses in the hospitality sector, the pandemic has decimated trading, and although we had made significant progress in navigating the financial challenges of the first lockdown, the second lockdown has made it imperative that we take further action.’
He added that the aim was ‘to continue to protect jobs, which has been our focus since March’.
Caffe Nero was forced to shut down completely for several months in the first lockdown and can now offer takeaways only
Caffe Nero had taken steps to try to adapt to the virus, by offering a click and collect service and home delivery, but it was not enough.
Will Wright, head of regional restructuring at KPMG, said: ‘Caffe Nero is an iconic brand on the UK’s high streets with a terrifically loyal customer base.
‘However, like many others across the sector, the impact of measures introduced in response to the Covid-19 pandemic has been devastating.’
CVAs have been used by other big high street names such as Debenhams, Clarks, Clintons and Homebase.
But critics say they are sometimes used as a device to wriggle out of debts and to strongarm landlords into cutting rent bills.
However, they are designed to give inherently viable companies that have run into difficulties the breathing space to get back on their feet.
Caffe Nero’s CVA will have to be approved by its creditors and landlords.
Separately, WH Smith confirmed it was set to close 25 shops, putting 200 jobs at risk, after reporting a £280million annual loss.