The collapse and subsequent re-emergence of Allied Carpets has prompted a bigger response on Retail Week’s website than any story we’ve ever run – beating the previous record-holder, last month’s pre-pack of Birthdays, by a short head.
Most are from furious and upset store staff, left completely in the dark and struggling to understand how their stores can be closed at short notice, their jobs lost, while others survive under new management.
You can’t blame them, because to anyone unfamiliar with the concept, pre-pack administrations must seem off to say the least. They are being used to rid bad businesses of their unwanted obligations to suppliers, staff and landlords, while at the same time allowing management to buy back any decent stores and take control of the stock.
Parliament’s Business and Enterprise Committee has highlighted its concerns over the potential for abuse of the system and whether all avenues for keeping a business going are being explored, and it’s about time the loopholes in the system are cracked down on.
Allied trumpeted this week that 51 stores and 400 jobs had been saved, but the farcical nature of what’s happened is demonstrated by the rump business that’s going to be left behind. If Allied couldn’t compete with Carpetright with 217 stores, how can it possibly be a viable national player with only 51? Oddly, many of the saved stores aren’t on retail parks, but in some pretty awful high street locations – hardly the future of carpet retailing.
While those involved with them might protest, in truth those retail businesses that hit the buffers and are then “rescued” barely ever really make a comeback. They limp along from crisis to crisis, the financial engineers wringing every last opportunity out of them until they finally reach the very end. At the same time, their bad practice makes it harder for good retailers to obtain credit insurance or cut deals with landlords.
The reality with Allied Carpets, as it was with MFI, was that years of mismanagement, compounded by a recession that has hammered the home furnishings market, had left the business without a future. When a retailer hits trouble the vultures will inevitably circle, and if the better bits can be salvaged and jobs saved, then great.
But the system is being abused, and pre-packs are being entered into without exploring all the avenues open for the future of a business. In the right hands they have a place, but that place isn’t to willfully harm the interests of suppliers and staff.