This week may be British retail’s worst one yet.
After Topshop parent Arcadia Group collapsed into administration Monday, Debenhams on Tuesday appeared to hit the end of the road, commencing a wind-down of U.K. operations that could potentially wipe out 12,000 jobs.
Debenhams will continue to sell through its 124 U.K. stores and online to liquidate its current stock and merchandise that is already in progress. The fashion retailer is still looking for offers for all or parts of the business. If no alternative offers have been received before the liquidation ends, the U.K. operations, including stores and e-commerce, will close.
Under administration, which is the U.K. equivalent of a U.S. Chapter 11 bankruptcy, Debenhams had numerous options for its future, which included a sale of all or part of the U.K. business; a further restructure of Debenhams’ operations to go forward on a standalone basis; or the orderly wind-down of the Debenhams business.
In a statement, Debenhams noted that the sale process “has not resulted in a deliverable proposal” with the current Covid-19-driven trading environment and its likely prolonged effects making the outlook for a restructured operation “highly uncertain.”
“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 U.K. retail industry, a viable deal could not be reached,” said Geoff Rowley of FRP Advisory, joint administrator to Debenhams and partner at FRP in a statement. “The decision to move forward with a closure program 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.”
JD Sports Fashion Plc, the sports, fashion and outdoor brands retailer, was in brief talks with Debenhams in late November to potentially acquire the department store, but it has confirmed that discussions with Deloitte regarding that deal have now been terminated.
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India’s Reliance Retail was attached to a potential deal in September to buy some of the bankrupt fashion chain’s assets, but no such agreement materialized. And Frasers Group owner Mike Ashley, who once held a 30 percent stake in Debenhams before U.S. lenders took the company over last year, had put in a bid of 125 million pounds ($166.7 million), but dropped out when the asking price hit 300 million pounds ($400.1 million).
Covid-19 didn’t help the 242-year-old department store’s fortunes, with the company permanently closing 20 locations after falling into administration. The retailer eliminated approximately 6,500 jobs this year, including 2,500 in August, to shed one-third of its original workforce since January.
The liquidators of Debenhams Ireland, KPMG, confirmed that it has already cleared out all stock from three of the 11 stores around the country. The Irish segment began its liquidation process in April alongside Debenhams’ administration filing.
The collapse of Debenhams comes a day after Philip Green’s Arcadia Group Limited, which owns brands including Topshop, Topman, Dorothy Perkins, Burton and Miss Selfridge, entered administration.
Combined, the business failures put 25,000 U.K. jobs at risk in an industry that has already been hammered with unemployment. Data from the Centre for Retail Research (CRR) calculates that 158,064 U.K. retail jobs were lost between January and Nov. 29.
With the Debenhams and Arcadia bankruptcies, the unfortunate theme of U.K. apparel retail since the spread of the Covid-19 pandemic has been that of collapse. A who’s who of merchants have entered administration following the viral outbreak, including Victoria’s Secret U.K., Laura Ashley, Cath Kidston, Diane von Furstenberg’s DVF Studio, Oasis, Warehouse, Peacocks, Jaeger, Edinburgh Woollen Mill, JD Sports’ Go Outdoors, DW Sports, M&Co, Monsoon, Accessorize and T.M. Lewin.
Debenhams’ collapse wasn’t the first time the retailer fell on hard times. The retailer initially filed for administration almost exactly a year earlier in April 2019, illustrating that while Covid-19 was the nail in the coffin for the high street business, it had plenty of underlying problems that hadn’t been addressed.
For one, the company had to fend off an upswell of newer fashion retailers in recent years such as Primark, Boohoo and Asos, all of which were skilled at commanding shopper attention and creating a convenient and trendy online presence. Additionally, like many American department stores, as the newer brands gained popularity, Debenhams’ product line lacked compelling differentiation.
And akin to many retailers in the U.S., the company was simply saddled with too much unsustainable debt as competitors started to race ahead. In fact, in March, Debenhams was shouldering a burden of 720 million pounds ($961.5 billion) in debt, hindering the kind of timely investments needed to quickly course correct.
Other U.K.-based chains chains including Next, John Lewis and Marks & Spencer are expected to take a look at prime Debenhams locations, but many could be broken up into smaller stores or redeveloped for other uses.
The future of Debenhams’ 45 franchised stores, which are located primarily in the Middle East, southeast Asia and eastern Europe, also depends on whether a buyer can be found for the U.K.
The wind-down does not impact subsidiary department store chain Magasin du Nord in Denmark, which continues to operate independently, it noted.