High street coffee shop chain Caffé Nero has launched a Company Voluntary Agreement (CVA) amid a major restructuring drive as the firm battles to avoid job losses and store closures. The impact of the Covid-19 pandemic has reportedly “decimated trading”, and that despite surviving the first lockdown, the current firebreak has forced the chain to resort to “further action” to stay afloat.
The firm – founded in 1997 and currently boasting over 1000 sites across eleven countries – is seeking a CVA, which will allow it to renegotiate terms with its landlords and creditors while still publicly trading. Accountancy firm KPMG has been appointed to oversee the process, with the hope that structural changes can be made “to better manage its fixed costs moving forward”.
Sales at Caffé Nero suffered immensely during the pandemic, as the majority of its 800 sites in the UK were forced to operate a take-away only service in the spring. Despite loosened restrictions over the summer when stores reopened, high street footfall remained well below average levels amid concerns about infection, and the chain has struggled to drum up enough sales to offset its losses in recent months.
While Caffé Nero was able to navigate the first lockdown – albeit with some difficulty – the firm said that the ongoing firebreak has driven it to new lows.
Gerry Ford, the chain’s founder and chief executive, stated:
“With many people continuing to work from home, ongoing limits to social interaction and a sustained reduction to footfall in city centres, it is unclear how long this will impact Caffè Nero”.
“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”.
It is understood that the CVA will see the chain moving most of its stores to a turnover-based rent system, and has reassured that it will strive to keep store closures to a minimum.
Caffè Nero currently employs about 5,000 UK staff, and usually serves as many as 135 million customers every year.
“Like many others across the sector, the impact of measures introduced in response to the Covid-19 pandemic has been devastating,” said Will Wright, head of regional restructuring at KPMG.
“In putting forward this CVA proposal, the directors have worked hard to strike a fair compromise with stakeholders to provide the flexibility the business urgently needs to get it through the pandemic”.