H&M gets tough with landlords

Amid turbulent times on the UK high street and a wave of CVAs, H&M has taken a leaf out of its British rival’s books by asking landlords to switch to turnover-based rents.


Reuters

The request has reportedly rattled landlords, particularly because H&M not only wants rents to be determined by the revenue generated in each store but also because it is proposing to deduct any in-store returns, including those from online purchases, from a shop’s revenues.

The move would mean property owners will receive less rent, putting more pressure on their retail property values.

H&M Group has more than 300 stores in the UK, operated under its Cos, Monki, Cheap Monday, & Other Stories, H&M, and Arket fascias.

In recent months the Swedish retailer has seen several rivals, including Topshop, New Look and Mothercare, go down the CVA route to reduce the size of their store portfolio. Other British retailers like Next and Primark are demanding similar rent cuts from landlords to level the playing field.

But some property owners consider H&M’s demands as too aggressive, reported The Sunday Times. The clothing giant is offering landlords ‘total occupational deals’, where they propose giving landlords a turnover-based sum leaving them to divide it between service charge, rent and business rates. 

The fact that business rates are more expensive than rent in some locations will mean some landlords will have to agree to the terms in a bid to ensure their business rates and service charge bills are covered.  

The newspaper said some landlords have already rejected the offer.

An H&M spokesperson said: “Like every retail business, we work with our landlords to draw up lease agreements that allow us to run a successful store portfolio. We won’t discuss the details of individual contracts as we consider this information to be commercially sensitive.”

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