JOHANNESBURG (Reuters) - UK Gourmet Burger Kitchen (GBK) filed for a form of bankruptcy protection on Wednesday after running up millions of pounds of losses, the latest British retail name to fall victim of weak consumer spending and high costs.
The chain’s parent, South Africa’s Famous Brands (FBRJ.J), said the board of GBK had initiated a company voluntary arrangement (CVA) for the business that would allow it to avoid insolvency or administration and ensure its continued existence.
Famous Brands bought GBK in 2016 but its contribution to group profitability has taken longer than the company initially anticipated, hampered by pressure on consumer spending as well as factors ranging from higher property rates, increased input costs and an oversupply of restaurants.
“The CVA process has the objective to ensure financial viability and the sustainability of the business into the future,” it said in a statement, adding it has assistance of accountants Grant Thornton for the process.
A string of UK retailers have either gone out of business or announced plans to close shops this year as they struggle with the tough business climate.
Early in October Famous Brands forecast GBK would make a wider operating loss of 2.6 million pounds ($3.4 million) for the six months ended Aug. 31, compared with a loss of 872,000 pounds in the corresponding period last year.
It also said it would take a pretax impairment charge of 874 million rand ($61.7 million) due to difficult trading conditions and the sustained underperformance of GBK.
CVAs allow retailers to avoid insolvency or administration by offloading unwanted stores and securing reduced rents on others. They have been adopted by British groups including fashion chain New Look, floor coverings retailer Carpetright (CPRC.L), mother and baby goods company Mothercare (MTC.L) and most recently home improvements chain Homebase.
At 1215 GMT shares in Famous Brands were up 5.26 percent at 104.99 rand.
($1 = 0.7742 pounds)
($1 = 14.1634 rand)
Reporting by Nqobile Dludla; Editing by David Goodman and David Holmes