Superdrug seeking rent cuts following "unprecedented" footfall decline

By

Barbara Santamaria

Published
May 4, 2020

Health and beauty retailer Superdrug has told landlords it will reduce its rent payments for at least three months, despite keeping a number of its UK stores open during the lockdown.

In a letter seen by the Financial Times, the company revealed its intention “to reduce our lease payments to 25 per cent of our passing rent commencing from the next due rental date for a minimum period of three months”.

“For the avoidance of doubt, this is a rent reduction as opposed to a rent deferment,” it said.

Superdrug, which sells essential products such as baby food and nappies as well as mak-eup items like eyeshadow and foundation, has more than 800 stores in the UK.

The business is owned by Hong-Kong based AS Watson, which in turn is controlled by billionaire Li Ka-shing, one of Asia’s richest men.

Superdrug declined to state how many of its stores have remained open during the coronavirus crisis, but it told the newspaper that UK high streets are facing “an unprecedented decline in footfall”.

“During this period of lockdown . . . we continue to incur the full costs of our store estate and we have paid our second quarter rent and service charges in full,” a spokesperson told FT.

“We are now seeking rent reductions across our store estate. We have longstanding partnerships with many of our landlords and trust that we have their support to ensure that both parties may continue to grow and thrive post the Covid-19 pandemic.”

Most retail companies asking for rent reductions operate what the government has deemed as non-essential businesses and had to close their stores to halt the spread of the virus. Others, like Boots and Poundstretcher, have been allowed to remain open but have also stopped or slashed payments in light of the health crisis and its impact on business. 

This is having a serious impact on property owners. “While many tenants, who are struggling financially, are reportedly agreeing payment plans and deferring payments with their landlords, there are concerns from property and asset managers that other tenants appear to be burying their heads in the sand or deliberately avoiding paying their bills,” said Steph Yates, senior consultant at Remit Consulting.

“A situation seems to be evolving where there are some tenants who genuinely can’t pay while others are simply choosing not to pay.”