Debenhams officially filed for administration in the U.K. on Thursday, though it’s determined to reopen as many stores as possible once the coronavirus-minded lockdowns come to an end.
The high-street fashion chain also appointed Geoff Rowley and Alastair Massey of FRP Advisory as administrators to oversee its insolvency process. Filing for administration in the U.K. is the equivalent of a Chapter 11 petition for bankruptcy court protection in the U.S. Debenhams said on Monday that it would file to protect the company from the threat of legal action that could force the business into liquidation.
The retailer’s 142 U.K. stores have remained closed since mid-March per the government’s lockdown mandate to prevent the spread of COVID-19.
Debenhams’ administrators will work with management to get the business into a position to reopen when the lockdown is lifted. The retailer’s online business across the U.K., Ireland and Denmark remain in operation. Most of its U.K. employees are on furlough.
“In these unprecedented circumstances, the appointment of the administrators will protect our 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,” CEO Stefaan Vansteenkiste said.
While the U.K. operation is expected to survive, the retailer’s business in the Republic of Ireland will be liquidated. Debenhams said its U.K. administrators will appoint a liquidator to oversee that process. The 11 stores in Ireland are currently closed, although the online platform remains in operation.
“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 service our customers has never been in question. The colleagues have been place on temporary layoff under the Irish government’s payment support schemes for employers and we will be working with them to support them through this process,” Vansteenkiste said.
Whether the 242-year-old chain can reopen in the U.K with all 142 stores is debatable and probably unlikely. The filing is the retailer’s second in 12 months, and if it is able to exit bankruptcy, it will likely do so with a considerably more modest store fleet. It already closed about 20 stores in January, and there were plans to close another 50 before the filing. It may need to close more than just those 50 doors, if it wants a chance at survival. The retailer, like all others globally, also faces an unknown near-term future when stores are able to reopen, and that’s not knowing what the consumer appetite for discretionary spending will be or if they’ll choose instead to continue to hunker down and rebuild cash reserves.
In the U.S. at least, analysts at credit ratings firm S&P are predicting that consumer discretionary spending may not return until well into late 2021.