The pre-pack administrations unveiled by Monsoon Accessorize and Quiz this morning were certainly portrayed as good news for the businesses and their respective workforces.

Jobs and stores will be saved under the two deals, both of which allowed existing owners and management – Peter Simon and Tarak Ramzan respectively – to carefully cherry-pick the parts of their struggling businesses that they wanted to buy out of administration.

Although the potential alternative to a pre-pack is for firms to disappear entirely, it has always been a controversial insolvency process. Those that involve current owners, rather than a third-party buyer bringing in fresh thinking and funding, have never sat right with me.

Monsoon Accessorize and Quiz both blamed coronavirus for their pre-pack administrations – and, admittedly, the impact of lockdown and resulting store closures will have wiped millions of pounds off their top lines.

“Frontline workers will be the biggest losers from these pre-pack arrangements. They are paying the heavy price for their employers’ previous strategic missteps”

But both retailers had significant problems long before the pandemic hit. Both were over-shopped after rapid high street expansions and were struggling to make their stores work hard enough for them in a multichannel world, as a lack of strategic future-proofing came home to roost.

The health emergency has simply accelerated such challenges – and given owners an opportunity to package up the best parts of their business and dump the rest.

But at what cost? Leaders and owners whose strategies were failing in a pre-Covid world now have an opportunity to start afresh, with reduced cost bases and debt piles. While they escape relatively unscathed, landlords and suppliers are left to take financial pain, while hundreds of shop staff are losing their jobs.

It is distressing, particularly in the current economic climes, that frontline workers will be the biggest losers from these pre-pack arrangements. They are paying the heavy price for their employers’ previous strategic missteps.

Moral maze

Let’s be clear – these deals are not illegal. But in my book, and those of numerous retail and property sources I have spoken to, they are immoral.

Adena Brands, a company controlled by Monsoon Accessorize owner and founder Simon, has acquired the retailer’s brands, intellectual property, head office, design teams and distribution centre in Wellingborough.

Under the terms of the deal, 35 shops have closed with immediate effect with 545 jobs lost. Simon will invest £15m in a bid to retain up to 100 stores – just half of the portfolio it operated prior to the pre-pack deal – and 2,300 jobs.

“The optics around both deals aren’t great. Customers and colleagues may struggle to buy into the Monsoon Accessorize and Quiz brands as a result”

At Quiz, “the business and certain assets” of Kast Retail – the wholly-owned subsidiary that operated Quiz’s 82 stores in the UK and Ireland – have been snapped up by another holding vehicle, Zandra, for £1.3m.

Quiz insisted Kast “is not financially viable in its current structure” and said it wanted to retain “an economically viable store portfolio” – 11 shops and 93 jobs have immediately been axed.

The optics around both deals aren’t great. Customers and colleagues may struggle to buy into the Monsoon Accessorize and Quiz brands in the future as a result. That will be a challenge Simon and Ramzan may now need to overcome.

But one thing is for sure – both now have opportunities to right their strategic wrongs and build businesses that are better equipped for the post-coronavirus future. Many frontline workers at both chains will not get the chance to go on that journey.

Facing the future

Of course, an even greater number of jobs and stores could have been lost had these rescue deals not gone through. For that, the respective buyers deserve credit.

But some of their successful high street rivals will point to another perceived immorality – the fact that their superior financial position leaves them at a commercial disadvantage since they are unable to reap the ‘benefits’ that come with such insolvency procedures.

Monsoon Accessorize’s store portfolio has been reshaped overnight, allowing it to axe unprofitable shops and reduce its liabilities to landlords almost at the click of a finger.

The likes of Zara owner Inditex, which this morning revealed it had experienced its first-ever quarterly loss, would probably love to do the same. Instead, it will close 450 shops over the next few years as it streamlines its portfolio and focuses on larger stores.

Those units, incidentally, will double up as “fashion distribution hubs” as the group leans into a digital future and rethinks the role of its stores.

Monsoon Accessorize and Quiz have not faced into the future in such a manner.

The hope is, after today’s pre-pack deals, Simon and Ramzan will be able to do exactly that – build on the restructuring of their respective businesses to carve out more sustainable models that can thrive for years to come.

But in the here and now, it is hundreds of frontline workers who are paying for the retailers’ mistakes.