The past few months have had a devastating impact on UK retail and swathes of chains have collapsed, but there is light at the end of the tunnel for some of these businesses. Retail Week takes a look at what the future holds for retail’s Covid casualties.
The retail sector was already facing an uphill battle at the beginning of 2020 – with the fallout from Brexit coupled with dwindling consumer confidence putting a strain on businesses – but no one could have predicted just how hard the struggle would be.
Coronavirus shuttered non-essential shops for close to three months and while the government has offered some support, including the furlough scheme, loans and business rates holidays, these measures simply weren’t enough for retailers that were already in precarious positions.
However, all is not lost and many of these businesses hope to return stronger and leaner than before.
Here’s a recap of which retailers have collapsed and what lies ahead for them.
Laura Ashley
One of the first Covid-19 casualties was fashion and homewares business Laura Ashley.
The retailer fell into administration in mid-March, blaming the impact of coronavirus, which had a “significant” effect on sales.
A month later, restructuring and investment firm Gordon Brothers purchased the Laura Ashley brand and its intellectual property.
The firm’s 147-strong store portfolio was not included in the deal, nor were its manufacturing and logistics operations in the UK or Republic of Ireland.
A buyer is yet to be found for either and so a store closure programme could be on the horizon.
At the time of the sale, Gordon Brothers said it would work with Laura Ashley’s existing management to “evaluate several go-to-market strategies” for the business.
However, there has been a swathe of redundancies, including the departure of chief executive Katharine Poulter, since Gordon Brothers took over.
Nonetheless, wholesale partnerships, licensee and franchise deals across the world are part of the plans to rebuild the business and its online arm, which has continued to trade throughout the crisis.
BrightHouse
Rent-to-own retailer BrightHouse tumbled into administration at the end of March, putting 2,400 jobs at risk.
The business, which has around 200,000 customers, offered consumers weekly payment plans to repay loans to purchase electrical items.
However, it has come under fire for its high rates of interest, and stricter lending rules had put the business under pressure way before stores were forced to closed during lockdown.
BrightHouse had been on the brink for many months, but it is understood that discussions with regulators and other stakeholders about a possible rescue plan, which would have involved restructuring its liabilities, ground to a halt after the outbreak of coronavirus.
There has been no recent update from administrator Grant Thornton, yet they have said they are exploring options to increase the value for creditors, including an orderly wind-down of the business over time and sale of the assets.
It seems unlikely that BrightHouse will rise from the ashes.
Debenhams
Debenhams tumbled into administration for the second time in a year in April.
However, the department store chain described the process as a ‘light touch’ administration, with management remaining in place as it sought to renegotiate leases.
Debenhams’ bank lenders, which took control of the department store after it collapsed last year, are said to remain supportive.
The retailer swiftly struck a deal to keep 120 of its 142 stores open and continued negotiating with landlords.
However, at the time of writing, 20 permanent store closures had been announced, including all Debenhams sites in Hammerson and Intu shopping centres.
Since its collapse, Debenhams has also lost chief executive Stefaan Vansteenkiste, who stepped down on May 29. It is also cutting hundreds of jobs at its head office as it seeks to operate more efficiently.
Debenhams has gradually been reopening shops since lockdown restrictions have eased.
The retailer is now run day to day by its senior management team, including chief financial officer Mike Hazell and managing director Steven Cook, under administrators from FRP Advisory. It is hoped a buyer can be found if the team can get Debenhams back in shape.
Oasis Warehouse
Another of the early fallers during the crisis was fashion retailer Oasis and its sister business Warehouse.
The group collapsed into administration back in April as the coronavirus outbreak pushed it over the edge.
After failing to initially find a buyer, all stores and concessions were wound down at the end of April, resulting in 1,803 job losses.
Yet all was not lost for the two brands and, two months later, Boohoo acquired the intellectual property of Oasis and Warehouse in a £5.2m deal from restructuring expert Hilco Capital.
The online fashion powerhouse plans to integrate the two retail labels onto its platform, which will allow “both brands to benefit from the group’s insight, infrastructure, supply chain and operating model”.
Boohoo aims to keep Oasis and Warehouse’s existing brand identities but significantly increase the number of SKUs they offer, aided by a recruitment drive across design, buying and merchandising.
The business plans to revitalise these brands in the UK market as well as internationally.
Boohoo is no stranger to sweeping up beleaguered businesses, buying Oasis and Warehouse’s former stablemates Karen Millen and Coast last year. No doubt this won’t be the last.
Cath Kidston
Fashion retailer Cath Kidston’s 60 UK stores were permanently shuttered following a pre-pack deal in April.
The chintzy chain attributed the Covid-19 crisis to the collapse of its retail arm, which resulted in 908 job losses.
CK Acquisitions, controlled by parent company Baring Private Equity Asia, bought the brand, ecommerce platform and wholesale business from administrators in a £17.8m deal.
It plans to boost its ecommerce business as well as its international wholesale and franchise ventures.
After the deal was secured in April, Cath Kidston chief executive Melinda Paraie said: “We now look to the future and are focused on transforming Cath Kidston into a brand-first, digital-led business with a continuing mission to brighten customers’ lives with our much-loved, British-inspired prints and designs.”
Victoria’s Secret UK
The collapse of Victoria’s Secret’s UK arm in early June was a further example of the havoc Covid-19 has wreaked on the entire retail industry.
The lingerie specialist, which operates 25 shops across the UK, appointed Deloitte as administrators, putting almost 800 jobs at risk.
However, this is also a ‘light touch’ administration, similar to that of Debenhams, with the day-to-day operations continuing, stores reopening and no immediate redundancies planned as a buyer is found.
And speculation has been rife about potential buyers, with high street stalwarts Marks & Spencer and Next understood to be mulling bids.
On the surface, both partnerships make sense, with Next continuing to build a larger stable of third-party brand partnerships and M&S one of the biggest competitors in the UK underwear market.
However, Victoria’s Secret would require some significant restructuring to make it profitable as its UK arm made an operating loss of £170m in the year to February 2019.
The future of its standalone stores could also be called into question if either of the mooted buyers are successful in their bids.
Quiz
Fast-fashion chain Quiz placed the division that runs its 82 standalone stores into administration in June.
The retailer blamed its demise on the enforced closure of stores during lockdown, the accelerating shift in consumer behaviour towards online and “difficulty in renegotiating reductions to the high levels of rents and rates”.
Kast Retail, the entity that owned its UK stores, went into administration before a speedy sale to Zandra Retail, also controlled by Quiz’s shareholders.
The pre-pack deal led to 93 job losses as the subsidiary snapped up its economically viable stores.
The retailer is seeking to reopen Quiz stores where it believes it is “prudent and economic” to do so.
Chief executive Tarak Ramzan said last month: “We believe that stores, with appropriate property costs and flexible lease terms, can continue to be a relevant pillar in our omnichannel model.”
With a streamlined store estate coupled with the strength of its concession model, international channel and online focus, Quiz will be better positioned to get back on its feet, but that relies on returning demand for occasionwear – a sector that has understandably fared badly during lockdown.
Monsoon Accessorize
Both the Monsoon and Accessorize chains will emerge “smaller and stronger”, founder Peter Simon has said after buying the business in a pre-pack deal last month.
Adena Brands, a company controlled by Simon, acquired the retailer’s brands, intellectual property, head Office, design teams and distribution centre in Wellingborough.
Under the terms of the deal, 35 shops were closed immediately, 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 company has appointed retail property specialist Harper Dennis Hobbs to help reopen stores across the UK “in time for summer”, and it is now hoped that 157 shops will be saved.
Simon said at the time of the deal: “Monsoon and Accessorize will both emerge smaller and stronger after this, but essentially the same – with our unique design flair and commitment to environmental standards and ethical trading intact.”
Oak Furnitureland
In the week that all non-essential stores were allowed to reopen again, it was revealed that Oak Furnitureland had been bought by hedge fund Davidson Kempner Capital Management in a pre-pack deal.
The firm blamed adverse trading conditions on its demise, yet it is hopeful that “substantial new funding”, provided by Davidson Kempner’s affiliated asset-lending business Breal Zeta Commercial Finance, will help get it back on track.
Existing Oak Furnitureland chief executive Alex Fisher will continue to lead the management team, and all employees have transferred as part of the acquisition.
Oak Furnitureland has reopened all 105 of its showrooms and is said to be working with suppliers, landlords and other partners to prepare the business for the post-Covid-19 environment.
Go Outdoors
Inflexible leases were blamed for owner JD Sports’ decision to place Go Outdoors into administration.
Go Outdoors appointed Deloitte as administrator on June 22. However, just two days later, the sportswear giant bought it for £56.5m in a bid to renegotiate better rents with landlords.
JD Sports said that if it was “fundamentally restructured” the chain could be salvaged. It added that it intended to “retain the majority of Go’s retail estate and preserve as many jobs as possible”.
It is now speaking to landlords with the hope of agreeing “new flexible lease contracts”.
Executive chairman Peter Cowgill said the leases need to “reflect the widely reported challenges of reduced consumer footfall”.
TM Lewin
Following more than three months in lockdown, shirtmaker TM Lewin fell into administration at the end of June.
The retailer struggled to keep up with rent and other bills when its store portfolio was ordered to close during lockdown.
The business’ woes were further compounded by the lack of demand for formalwear, with offices closed and events cancelled.
TM Lewin’s assets were bought back by its owner Torque Brands, an investment vehicle for private-equity firm Stonebridge, in a pre-pack deal. The move came a month after Torque acquired the shirtmaker from investment firm Bain.
However, Torque did not acquire TM Lewin’s stores and the retailer will now operate as an online-only business. Around 600 jobs are expected to be lost as a result of the closure of its 66 shops.
Torque is led by Simba Sleep co-founder James Cox and backed by former Asda boss Allan Leighton and Paul Taylor, who previously ran Harrods.
It plans to build a stable of brands that can be rolled out worldwide, which will all use the same IT, manufacturing and distribution systems as TM Lewin to minimise costs.
Harveys
A buyer is still being sought for furniture chain Harveys after the business tumbled into administration at the end of June.
Sister retailer Bensons for Beds was rescued in a pre-pack deal. However, PwC is still hunting for a buyer for Harveys.
If a rescue bid isn’t secured, then around 1,500 jobs could be lost, with 240 redundancies already being made. The administrators blamed the increasingly challenging trading conditions for the retailer’s demise.
Joint administrator Zelf Hussain said: “This has resulted in cash flow pressures, exacerbated by the effects of coronavirus on the supply chain and customer sales.
“It has not been possible to secure further investment to continue to trade the group in its current form.”
Bensons for Beds
Harveys stablemate Bensons for Beds enjoyed a more favourable outcome after being bought in a pre-pack deal by turnaround firm Alteri Investors, saving nearly 2,000 jobs.
The bed specialist, which operates 243 shops, succumbed to pressures on cash flow aggravated by the global pandemic.
Previous owner Alteri will invest £25m of fresh funding into the retailer in a bid to turn the business around.
However, it plans to close one of Bensons’ manufacturing sites and may downsize its store estate depending on what rent deals it can secure.
Bensons for Beds boss Mark Jackson said the restructuring would allow the bed specialist to emerge as a “leaner and fitter business, well positioned to rebuild in a new retail environment”.
He added: “Bensons has a bright future. Our vertically integrated British manufacturing base sets us apart in the market, and we now have the foundation that will allow us to ensure Bensons can prosper.”
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