Ann Summers is the latest struggling retailer to seek lower rents from landlords amid a high street downturn.
The retailer, best known for its sex toys and lingerie, has hired property advisers to discuss options for its 106 stores after slumping to a £3.3m loss last year. The plunge into the red was blamed on rising store costs as well as the Brexit shock to sterling, which pushed up sourcing costs. Ann Summers employs around 1,250 staff.
A property industry source said the negotiations could be a precursor to a company voluntary arrangement, a form of insolvency used to close unwanted stores and seek reduced rents. Sir Philip Green is currently working on a CVA as part of a turnaround plan for his ailing Arcadia high street empire.
“Ann Summers are going about this in the right way, but if they don’t get the rent reductions they will probably pursue a CVA,” one property source said. The retailer is understood to have hired the property firm CWM.
Sales at Ann Summers were flat at about £110m in the year to 30 June, but the £3.3m loss replaced the previous year’s £2.9m profit, according to the most recent accounts filed at Companies House.
A spokesperson for the company said: “As a leading retailer operating in the current retail climate, we are constantly striving to secure the most cost-effective and responsible ways of working. This includes working with a property agent on our existing portfolio as well as new sites that we hope to secure in the near future.”
Ann Summers’ chief executive, Jacqueline Gold, said 2018 had been a “difficult year” for the company and attributed the losses to higher sourcing costs, business taxes and investment in a new look for the 49-year-old brand. The devaluation of sterling after the Brexit vote had put pressure on margins, she added, eroding £1.5m of profit.
Jonathan De Mello, the head of retail consultancy at Harper Dennis Hobbs, said: “Ten years ago, landlords were negative about having Ann Summers in their scheme as it was seen as a glorified sex shop, and they always drove a hard bargain on rents.
“The market has changed and it has become an increasingly desirable tenant. The problem for them is that within its ranges, sex toys are the more profitable products and they are increasingly being bought online.”
Ann Summers, which also organises 7,000 Tupperware-style parties a week for women to buy its sex toys and nightwear, has also been affected by the success of online rivals such as Lovehoney. The Bath-based website has grown rapidly and is close to overtaking its bricks-and-mortar rival in sales terms.
In a note to the accounts, Gold said: “As with all retailers, we face the disproportionate burden of business rates on our stores … that threatens our high streets, unlike the pure-play brands and online giants whose competitive advantage remains unchallenged.
“Employment costs have escalated by £0.5m, caused by a combination of [the] ‘national living wage’, pension contribution ratchets and the apprenticeship levy. Whilst the sentiment of these increases might be right, the impact of all these changes imposed at once … means that we are simply burdened by more and more unaffordable taxes.”
