High street retailers Clinton Cards, Monsoon, Accessorize and Sports Direct have taken a stand against the landlords of their shops, demanding the right to pay rents on a monthly rather than quarterly basis to ease cash flow pressures.
The three retailers, who occupy 1,600 UK stores between them, are frustrated with the current system, which requires tenants to pay three months’ rent in advance, four times a year.
Their demands for more flexible payment options come at a time when high street chains including Peacocks and Barratts Priceless have collapsed into administration and retailers are battling to cut costs as consumers trim spending.
Darcy Willson-Rymer, chief executive of Clinton Cards, said half of its landlords had agreed to let the 800-store greeting cards chain move to monthly rents, following requests made over the past four months. “This is a structural change in the way landlords do business but, over time, it will become the norm,” said Mr Willson-Rymer.
Stating his objective was “a smoothing of cash flow over the course of the year”, he added that the retailer had historically worked with suppliers to manage payments for “peak periods” such as Christmas and Valentine’s day but never with landlords.
Fashion retailer Monsoon has written to landlords of its 405 UK stores in the past fortnight, stating it is “imperative” it is allowed to pay all its rents on a monthly basis, mirroring terms on its 887 international stores.
The confidential letter, seen by the Financial Times and first published in business magazine Property Week, describes quarterly rental payments as an “archaic practice” which are “entirely out of line with the operation of a modern retail business”.
The letter stressed the request was “in no way an indication of the financial state of the company”, which trebled pre-tax profits to £98m in its last published accounts, filed in April 2011.
Sports Direct wrote to landlords of its 400 UK stores before Christmas asking for monthly rental payments. Dave Forsey, chief executive, said while there had been a “reasonable” response from small and medium-sized landlords, big landlords were “still sticking to quarterly terms”.
“Our concern is the disparity between struggling retailers and growing retailers,” he said, in reference to sector rivals who have been paying rents on a monthly basis following restructuring deals. “It feels like there’s a two-tier approach and the strong are disproportionately supporting the weak. We want to invest in our store portfolio, and landlords should encourage us by being consistent across their estates.”
Beth Hinde, head of property at the British Retail Consortium, said: “Paying quarterly rents up front takes cash flow out of retail businesses at a time when they need to have that money in the business working for them. “ The BRC has been campaigning for landlords to move towards monthly rents since 2006.