CVA could lead to significant store closures and job losses at Burnley retailer TOFS

The spectre of job losses is hanging over Burnley-based discount retailer, The Original Factory Shop (TOFS), just two months after its acquisition by Modella Capital.

London-based investment group Modella bought TOFS from previous owner, private equity firm Duke Street, in February, with no remaining bank debt, for an undisclosed sum.

Modella, which also owns Hobbycraft and recently sealed a deal to acquire the high street arm of WH Smith’s, is now believed to be preparing to launch a company voluntary arrangement (CVA) at TOFS, including demands for two-year rent-free periods from some landlords.

It is feared the move could lead to significant store closures and job losses among the 1,800-strong TOFS workforce. The retailer operates around 180 stores. A distribution centre is also thought to be included in the CVA.

Modella has declined to comment, according to Sky News.

It reportedly engaged restructuring exports at Interpath to work on the CVA immediately after its takeover of the Burnley-based group.

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

It was founded in 1969 and was acquired by Duke Street in 2007, from the private equity arm of Barclays for £68.5m.

Earlier this year Duke Street was believed to be considering putting the business on the market, but brought forward the potential divestment after interest in a deal.

Potential bidders were said to have included Baaj Capital, Mike Ashley’s Frasers Group and Poundstretcher.

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.