The sportswear tycoon Dave Whelan is heading for a showdown with landlords over plans for an overhaul of his Fitness First gyms empire that would involve site closures and steep rent cuts.
Sky News has learnt that Mr Whelan, best-known as the former owner of Wigan Athletic Football Club, is working with advisers on a restructuring plan for the health clubs chain he bought in 2016.
Property industry sources said this weekend that the proposals could be formally unveiled as soon as next month.
One landlord said they anticipated that approximately a quarter of Fitness First’s roughly 45 UK clubs could be earmarked for closure.
Another potentially affected property-owner said they expected Mr Whelan’s group to seek rent reductions of as much as 90% across some of its remaining gyms.
According to the most recently filed accounts for Fitness First Clubs, the company lost more than £10m in the year to 31 March 2021, although its performance during that period was hammered by the pandemic.
Its accounts for the following year are now nearly a month overdue.
The bulk of Fitness First’s operations are in London, with clubs in prominent locations such as Oxford Circus, Baker Street and Liverpool Street.
Filings show that earlier this month, Teneo Financial Advisory was appointed administrator to Fitness First (Curzons) Limited, a company affiliated to the wider group.
Further details of Mr Whelan’s proposals were unclear this weekend, while the impact on jobs at the company as a result of prospective gym closures could also not be ascertained.
A quarter of Fitness First’s clubs could be earmarked for closure
The tycoon, who founded JJB Sports, which became one of Britain’s biggest high street sporting goods retailers, acquired a large chunk of Fitness First’s UK operations seven years ago as part of a separate restructuring of the multinational gyms operator.
Under different ownership, Fitness First had previously shed dozens of struggling UK clubs through a mechanism known as a company voluntary arrangement in 2013.
The use of a restructuring plan rather than a CVA to implement its latest overhaul could prove controversial among affected landlords.
Virgin Active, another gyms group, deployed a restructuring plan to force through a financial restructuring in 2021 as it teetered on the brink of collapse.
The mechanism allows companies to ‘cram down’ creditors to force proposals through even if they vote against them.
Mr Whelan himself has also experienced the sharp end of the health and fitness sector as competition has grown, particularly among cheaper operators.
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In 2020, DW Sports, the chain he founded in 2009 after acquiring 50 sites from JJB Sports, crashed into administration, citing the impact of COVID-19 lockdowns.
Roughly half of the company’s 1,700-strong workforce was saved when Mr Whelan’s rival, the Sports Direct tycoon Mike Ashley, engineered a deal for his Frasers Group to buy just over half of DW Sports’ sites.
The gyms industry has faced extraordinary turbulence in recent years, with the pandemic and soaring energy costs having a marked impact on operators’ ability to make money.
The Gym Group, a London-listed chain, has seen its shares halve during the last year, and it now has a market capitalisation of just £185m.
Mr Whelan could not be reached for comment, while Fitness First did not respond to a series of emailed requests for comment sent on Friday and Saturday.