Less than 24 hours after Arcadia went into administration, it has been announced that Debenhams is to be wound down after JD Sports pulled out of rescue talks.
Reports last week suggested that JD Sports was closing in on a deal to acquire the ailing department store chain. However, its board is said to have decided against the move after learning of the demise of Arcadia, which is Debenhams’ biggest concession holder.
The 242-year-old department store chain revealed this morning its administrators have “regretfully” decided to start the liquidation process, while continuing to seek offers for all or parts of the business.
The 124 Debenhams stores in the UK and its online business will continue to trade, clearing existing stock. Hilco, the restructuring firm which specialises in winding up retailers, will start going into stores from tomorrow.
The retailer said that on conclusion of this process, if no alternative offers have been received, the UK operations will close, putting all 12,000 employees out of work.
Geoff Rowley of FRP Advisory, joint administrator to Debenhams and partner at FRP, said: “All reasonable steps were taken to complete a transaction that would secure the future of Debenhams. However, the economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached.
“The decision to move forward with a closure programme has been carefully assessed and, while we remain hopeful that alternative proposals for the business may yet be received, we deeply regret that circumstances force us to commence this course of action.”
Administrators assured suppliers and other creditors, including landlords, that all contractual obligations would be met in full.
Debenhams was put into administration in April for the second time in two years to prevent winding-up orders from creditors. Breaking up the chain could see key sites picked up by the likes of M&S, Next and John Lewis. Reports in recent weeks have suggested that The Hut Group has been eying Debenhams’ online business.
Richard Lim, Chief Executive at Retail Economics commented: “We can not overstate the significance of this collapse given the vast property portfolio, number of jobs impacted and the reverberations felt across the industry.
“In a week that has seen the collapse of the Arcadia Group, this is a truly devastating week for the high street. This puts up to 25,000 jobs at risk in just a couple of days.
“The reality is that Debenhams has been outmanoeuvred by more nimble competitors, failed to embrace change and was left with a tiring proposition. The impact of the pandemic has accelerated its demise but underlying issues within the business were the root cause.”
NAM Implications:
- Despite all the signs…
- …the liquidation of a business is always a shock and deeply regrettable.
- Meanwhile, NAMs have to calculate the incremental sales required to replace lost business.
- Lesson: Why not calculate same for all your customers, however healthy.
- [Those who need to know how, pls contact NamNews]
