On the eve of a second national lockdown in the U.K., businesses are moving ahead with plans to secure their future.
Parliament is set to vote on Wednesday on a new lockdown measure that would temporarily shutter all nonessential retailers until at least Dec. 2. A shutdown would come at a time when fashion retailers are expected to hit their prime selling season on hopes of recouping months of saled derailed by Covid-19.
Data analytics firm Springboard has already revised its original Christmas foot traffic forecast for the period from Nov. 22 to Dec. 26. Given the anticipated new lockdown starting on Thursday, Springboard is predicting that foot traffic could be down 62 percent, versus its initial estimate of down 32.7 percent. High streets could be hit the hardest with a decline of 87.3 percent, the data firm said on Monday.
John Lewis Partnership
Department store chain John Lewis said it is beginning the next phase of its five-year plan to return to profitability by 2025, an initiative that was disclosed last month. Under the plan, the retailers aims to report 400 million pounds ($519.7 million) in profits by 2025 and prioritize digital commerce.
On Wednesday, the company said it plans to become a “leaner, simpler and faster business” that will leverage operational efficiencies to drive 300 million pounds ($389.2 million) in annual savings by 2022. To get there, John Lewis will shed up to 1,500 jobs through April at two head offices in London Victoria and Bracknell. The change will save another 50 million pounds ($64.9 million) on top of the 50 million pounds in recent efficiencies and contribute towards the 300 million pound ($389.2 million) goal. John Lewis said it will try to find new roles for those impacted by the changes. The cuts follow the July announcement that it planned to close eight stores, impacting about 1,300 jobs.
In addition, Patrick Lewis, executive director, finance, has elected to leave the company at the end of the year after a 26-year career. He will be succeeded by Bérangère Michel, a former finance director and currently executive director, customer service.
“Our Partnership Plan sets a course to create a thriving and sustainable business for the future. To achieve this we must be agile and able to adapt quickly to the changing needs of our customers,” Sharon White, John Lewis’ chairman, said.
John Lewis also plans to convert some sales floor square footage at its Oxford Street store into office space.
Meanwhile, Clarks is expected to file a company voluntary arrangement, toppling the footwear firm into administration. The plan is similar to a pre-packaged bankruptcy in the U.S. because the filing will effect a 100 million pound ($129.7 million) investment from LionRock Capital, a Hong Kong-based private-equity firm.
Terms of the investment weren’t immediately available, though potential store closures would likely fuel job losses. The 195-year old company, and one of U.K.’s oldest footwear retailers, had been in talks with landlords over rent payments. Last month, speculation was that as many as 50 stores might need to be shuttered. Clarks in May shed 900 jobs after the first Covid-19 wave hit.
A local news report Wednesday said that the company would likely keep all 320 stores open, with no rent on 60 locations. Some outlets would be converted from fee-based rents to a model based on a percentage of sales, although that still requires landlord approval.
“In order to address the permanent shift in structural shopping behaviour as a result of the Covid-19 pandemic, the CVA is being launched out of absolute necessity,” Philip de Klerk, interim finance chief at Clarks, was quoted as saying. “It is important to stress that we are not announcing the closure of any stores today, and employees and suppliers will continue to be paid.”
If all goes well and the LionRock investment goes through, the private equity firm will become the majority owner, with members of the Clarks family holding a minority interest.
Elsewhere in U.K. news
The future of Debenhams is on shaky ground. Over the weekend, Mike Ashley, who owns Frasers Group but made his name through his stake in Sports Direct, reportedly claimed that his company has been excluded from the auction for the bankrupt department store chain. Ashley raised his bid for the chain to a reported 125 million pounds ($162.2 million) from his initial offer of 100 million pounds ($129.7 million). He allegedly was told the raised bid was “inadequate,” which prompted fury from the retail mogul, who claimed that he wasn’t provided with sufficient information. Lazard, the investment bank conducting the auction, reportedly had been seeking bids of around 300 million pounds ($389.2 million).
Debenhams had hired retail restructuring and liquidation firm Hilco Capital in August as part of its insolvency proceedings. It wasn’t immediately clear what the plans are now for Debenhams. Retail Gazette reported that the liquidation firm had put in a bid of its own to keep some stores open, but had also planned to send “teams into Debenhams’ stores as early as this week.”
Those plans might be hitting a snag, given the expected lockdown that begins on Thursday.
Executives at Hilco’s U.K. office could not be reached for comment.