Hotter Shoes CVA approved by creditors
Electra Private Equity has confirmed that Hotter Shoes’ company voluntary arrangement (CVA) has been given the green light.
The CVA proposal launched on 9 July for Hotter Shoes has been approved by 99.5% of those who voted, with a majority vote in favour of proposals from each category of creditor. It will result in the closure of 46 of its stores, reducing its store estate to 15.
The company said it has received and continues to receive significant support from the UK Government during the pandemic. This support includes rates relief, and furlough support, contributing significantly to the ability of management teams to respond effectively to the crisis, to the preservation of thousands of UK jobs, and the continuation of the resultant tax revenue streams.
In accordance with the statutory provisions there now commences a 28-day period in which creditors may challenge the CVA outcome. A further announcement regarding the outcome is expected in late August.
Commenting on the approval of the CVA proposal, Ian Watson, Chief Executive of Hotter Shoes, said: "I would like to thank my colleagues for their support and understanding through this process. Following the impact of COVID-19 the CVA was a regrettable but necessary step to avoid the likelihood of Hotter going into administration causing a much larger number of job losses, and was critical to ensure a viable future for the business.
"Now, we can focus on accelerating the implementation of our strategy to develop the respected and valuable Hotter brand with a greater emphasis on its online offering, which should establish a successful long-term future for the business."
Hotter Shoes is expected to emerge from the CVA process with its targeted sales channel structure in place and its fixed cost base significantly reduced. This, combined with the delivery of a number of strategic initiatives, including an enhanced web platform launched in June, and the anticipated benefits of enhanced product development and design activity reflected in the upcoming autumn/winter product, allows the business to face the uncertainties of the current market.
The COVID-19 crisis has accelerated Hotter's strategy of digitisation, which will refocus the business on its online and direct-to-consumer channels. This strategy will also see a return to the company's core area of success, which is a focus on comfort and fit, supported by industry-leading, bespoke technology.
UK e-commerce sales growth of 11% YTD with 35% coming from new customers gives confidence that as an e-commerce focussed business Hotter has the opportunity for a positive future with profitable growth and value creation.
On a pro-forma basis, using actual results for the year to January 2020, and therefore excluding any retail revenue retained through channel shift, following the significant structural changes being implemented before the end of August, Hotter's total revenue would be reduced from £85.6m to £59.8m, with 80% of sales being direct to consumer compared with 55% in the prior year.