Hundreds of jobs at risk as The Original Factory Shop launches survival plan

Nearly 1,000 jobs could be under threat at The Original Factory Shop (TOFS), one of Britain’s largest discount retailers, as part of a survival plan which centres on plans for swingeing rent cuts.

Sky News has learnt that Modella Capital, the new owner of TOFS, has drawn up plans to renegotiate rents at 88 of the company’s 178 stores.

The proposals are contained in a company voluntary arrangement (CVA), a last-ditch restructuring process, which was launched on Thursday.

TOFS employees are said to have been briefed on the plans.

The chain sells beauty brands such as L’Oreal, the sportswear label Adidas and DIY tools made by Black & Decker.

It employs about 2,000 people, with a proportion of its 176 head office and warehouse employees understood to be facing redundancy.

Creditors will be asked to vote on the plans at a meeting in mid-May.

The CVA is being handled by Interpath Advisory.

Although there are no definite store closures, people familiar with the plans said half of TOFS’ estate was at risk if landlords did not agree to the rent demands.

It is the second such brutal restructuring to be launched by a Modella Capital-owned retailer this week.

Sky News revealed on Tuesday that Hobbycraft, which the investor also owns, is also launching a CVA which would entail the closure of nine shops.

Hundreds of jobs could be at risk there too if rent cuts are not acceded to.

The blueprint risks becoming a controversial one for Modella and for WH Smith, which has just agreed the sale of its high street arm to the investment firm.

Retail insiders believe a similar restructuring is inevitable at WH Smith, which Modella has said will be renamed in town centres as TG Jones.

“In response to the challenging retail environment of the last year, The Original Factory Shop (TOFS) has today announced a proposed Company Voluntary Arrangement (CVA) in order to protect the future of TOFS as a business and to allow it to flourish in the future,” a statement from the company said.

“Under TOFS’ plan, which will be subject to a vote by the company’s creditors on May 14, TOFS will adjust its store estate (by, where possible, renegotiating the leases on a number of its stores that are loss-making), return to the deal-centric stock and purchasing strategy it is famous for, invest in online channels, and re-align its support centre and logistics operations.

“All employees have been informed of the CVA proposal.

“A redundancy consultation will begin with employees in those TOFS stores where the company is seeking to renegotiate the lease, in the event that those negotiations are not successful.

“There will also be a reduction in the number of employees in the company’s Head Office and Warehouse in Burnley.

“There will be no change in the day-to-day running of the business while this plan is implemented, and management will keep all TOFS colleagues updated as the process continues.

“While these changes are necessary, TOFS remains committed to serving our loyal customers across the UK.

“Our plan aims to put the business on sustainable footing, protecting as many jobs as possible, and allowing us to return to offering the exceptional value and deals our customers expect from us.”

TOFS, which was founded in 1969, was bought by the private equity firm Duke Street in 2007.

Duke Street had tried to sell the business before, having supported it through the COVID-19 pandemic with a cash injection of more than £10m.