As flagged at the start of last week, Debenhams has now appointed administrators in order to protect its UK business from the threat of legal action that it claims could have pushed it into liquidation.
Whilst its online business is still trading, Debenhams has millions of pounds worth stock which it cannot sell as all of its 142 department stores are currently closed due to the coronavirus lockdown. This had led to concerns about potential legal claims from suppliers who have yet to be paid. The administration will protect the business from the threat of legal action.
Geoff Rowley and Alastair Massey of FRP Advisory have been appointed as administrators. They will be adopting a “light touch” administration as they work with Debenhams’ management team to get to a position where they can re-open as many stores as possible once the coronavirus restrictions are lifted.
Debenhams entered into a pre-pack administration in April last year and was then sold to its lenders, comprising of hedge funds and banks. It permanently closed 22 stores at the start of this year as part of its turnaround plan, with a further 28 due to shut in 2021.
Meanwhile, the group announced that it plans to liquidate its operations in the Republic of Ireland due to “trading challenges” in the market which have been exacerbated by the coronavirus crisis.
Its remaining 11 stores in the country are currently closed due to the lockdown, with most not now expected to reopen. However, shoppers in Ireland will still be able to order from Debenhams online store.
Stefaan Vansteenkiste, CEO of Debenhams, said: “In these unprecedented circumstances the appointment of the administrators will protect our UK business, our employees, and other important stakeholders, so that we are in a position to resume trading from our stores when Government restrictions are lifted. We anticipate that our highly supportive owners and lenders will make additional funding available to fund the administration period.”
He added: “We are desperately sorry not to be able to keep the Irish business operating but are faced with no alternative option in the current environment. This decision has not been taken lightly and is no way a reflection on our Irish colleagues, whose professionalism and commitment to serving our customers has never been in question.”
Sofie Willmott, a retail analyst at GlobalData, said last week that Debenhams’ second administration in 12 months was “stringing out its demise and its long-term future remains bleak”.
She said: “With significant further investment in the business now very unlikely, it is difficult to see what will attract shoppers back once its stores can reopen.
“The department store chain was already in trouble before the Covid-19 pandemic hit and the sharp shift in consumer shopping habits will only speed up inevitable changes in the UK market. Weaker retailers without a unique selling point will be weeded out, with many unable to survive the year.”
NAM Implication:
- Those suppliers still on board examining their options?
