Drama in the U.K. fashion space continues as administration—the country’s equivalent to bankruptcy in the U.S.—could potentially befall three more apparel retailers.
On July 3, DW Sports filed for administration and will shutter all its 75 stores, putting approximately 1,700 employees at risk of being laid off. BDO LLP was appointed administrator of the U.K.-based athleticwear retailer, but only so it can try and sell as much of DW Sports’ business as possible and save the company’s 73 gyms.
The retailer has already closed 25 of its 75 retail stores in recent weeks, while the remaining stores will liquidate during the process. The DW Sports e-commerce site has shut down.
According to Martin Long, the CEO of DW Sports, the firm’s average £15 million ($19.7 million) per month income had fallen to zero overnight, while it still had a £3 million ($3.9 million) monthly wage bill.
Meanwhile, Scottish value fashion retailer M&Co has been put into pre-pack administration and will close 47 of its 265 stores and cut nearly 380 jobs, while River Island already cut 250 office jobs and is reportedly considering a Company Voluntary Arrangement (CVA) or other form of administration, according to a report from The Sunday Times.
While M&Co put its administration process in the hands of Deloitte, the founding McGeoch family bought the company back as part of the pre-pack administration process. Pre-pack administration is an insolvency procedure in which a company arranges to sell all or some of its assets to a predetermined third-party buyer prior to appointing an administrator, or bankruptcy advisor, to facilitate the full sale. This allows the company to shed most liabilities when it formally files for administration.
After the cuts, M&Co will maintain approximately 2,600 employees.
In the case of River Island, the fashion retailer is seeking to close some of its 300 stores and slash rents on others, a common concern that U.K. fashion retailers have expressed amid prolonged pandemic shutdowns.
However, executives have expressed concerns over whether creditors would approve its CVA considering its financially stable position in the market, the report said. At least 75 percent of creditors must approve for a company to successfully undertake a CVA, according to the 1986 Insolvency Act.
Like many in the apparel retail space both in the U.K. and the U.S., these companies experienced major declines in sales and foot traffic well before COVID-19’s existence. But the virus essentially made all problems worse once stores were forced to close, as they had to rely on their online operation to generate any kind of income.
Both M&Co and River Island experienced these pre-pandemic struggles: M&Co saw operating profits drop 40 percent to £3.6 million ($4.7 million) as of its latest annual financial update in February. On a similar note River Island’s operating profits plunged 56.4 percent to £35.1 million ($46.1 million) as of September.
U.K.’s apparel problems are hitting retailers of all shapes and sizes. To close out July, Debenhams put itself up for sale in hopes of preventing a liquidation. The 242-year old department store chain entered insolvency proceedings for the second time within a year and the third time in its recent history as it continues to operate under a “light touch” administration process, in which can continue with business as usual while putting off its debts.
Other fashion companies across the pond that have fallen into administration since the start of the pandemic include Victoria’s Secret U.K., Laura Ashley, Cath Kidston, Diane von Furstenberg’s DVF Studio, JD Sports’ Go Outdoors, Monsoon, Accessorize and T.M. Lewin.
The landlords that have been trying to collect rent throughout the period have felt a negative impact as well, with Intu Properties, a major shopping center operator with 17 malls in the U.K. and three in Spain, filing for administration in July.