UK private equity investor plots closure of up to 80 former WHSmith stores

The private equity group that bought WHSmith’s high street business is considering shutting about 80 stores and cutting thousands of jobs as part of a restructuring of the stationery and books chain.

Modella Capital on Monday appointed professional services firm Teneo to assess options to boost the profitability of the 233-year-old high-street business, which was rebranded as TG Jones last year, according to two people with knowledge of the appointment.

The plans are at an early stage and could also involve financial support for TG Jones, the people said, adding that about 80 of the chain’s 480 stores could be closed. The final number is likely to depend on discussions with landlords on rent, they added.

The move comes as Modella’s other businesses are also caught up in the pressure on UK high street retailers, which face intense competition, higher taxes on businesses and consumers as well as lingering inflation.

Two Modella businesses, Claire’s Accessories and The Original Factory Shop, went into administration this year, joining British high street names such as Game Group, footwear seller Russell & Bromley and clothing chain LK Bennett.

The £40mn deal for WHSmith’s high street business was the most high-profile deal struck by Modella last year, transforming it from an empty shell into an investment firm controlling UK retailers that employed more than 10,000 staff and had close to 1,000 stores.

However almost 300 shops were closed and more than 2,000 jobs were lost when The Original Factory Shop and Claire’s Accessories went into administration.

Modella has spent £14mn refurbishing TG Jones’s stores since last year’s takeover as part of a strategy to turn them into a “hub of the high street” offering books, crafts, toys, banking and postal services.

Last week Sean Toal stepped down as CEO of TG Jones after less than a year and was replaced by Alex Willson, the former chief executive of HobbyCraft, another company in Modella’s portfolio.

“The combination of cost inflation, weak consumer confidence and adverse Government fiscal policies puts significant pressure on all retailers,” Modella said in a statement.

“Against this backdrop, the management of TG Jones is working hard to turn around this important retail business and they are drawing on the best available advice in doing so.”

Modella acquired the high street businesses when WHSmith split them off to focus on sales in airports, train stations and hospitals.

The two sides struck a year-long transitional services agreement, which prevented Modella from launching a restructuring through a company voluntary arrangement in its first year of ownership. That expires in June.

However the agreement is likely to be relaxed if Modella needs to act, a person briefed on the discussions said.