Tesco buys Paperchase brand but jobs still at risk

by admin February 1, 2023

Tesco has acquired the Paperchase brand out of administration in a deal that puts the future of 106 stores and 820 jobs at the gift and stationery retailer at risk.

Administrators from Begbies Traynor were appointed to Paperchase after attempts to find viable offers for the business failed. They confirmed yesterday evening that 75 employees based in the retailer’s head office in London had been made redundant.

However, Begbies Traynor said Paperchase would continue trading in the short term, with all stores remaining open as normal.

Yesterday Jan Marchant, managing director of home and clothing at Tesco, said: “Paperchase is a well-loved brand by so many, and we’re proud to bring it to Tesco stores across the UK.” She said Tesco had been working on plans to bring in more third-party brands.

Paperchase was founded by two art students and opened its first store in Kensington, west London, in 1968. It launched a company voluntary arrangement in 2020 to cut stores and reduce costs before putting the business through a pre-pack administration, where assets are sold before administrators are appointed, in January 2021 after sales were hit by the government’s pre-Christmas lockdown. The Tesco deal is also a pre-pack arrangement.

The company was sold back to Permira Debt Managers, its secured creditor, in a fast-track insolvency process that saved most of its stores, but landlords were forced to renegotiate lease terms as part of the arrangement. The deal saw the loss of about 500 jobs.

The retailer was then bought by a consortium led by Steve Curtis, chairman of the fashion retailer Jigsaw, in August last year. Curtis, who works with the investment group Rcapital and Quilam Capital, has worked with retailers such as Tie Rack.

Stephen Springham, head of retail research at Knight Frank, said the latest collapse of Paperchase was “not altogether a surprise, given its company voluntary arrangement history and its pass-the-parcel history of private equity ownership”.

However, Springham added that there should be considerable interest because it is a strong, differentiated brand in a retail sub-sector that enjoys high gross margins and fast stock-turn.