The U.K.’s fashion retail sector is facing an unparalleled crisis in the run-up to Christmas. Long-standing retail giants are tumbling on an almost daily basis following a two-week bloodbath that saw department store Debenhams go bust this morning, less than 24 hours after Arcadia Group went into administration.
Jaeger, Peacocks and Moss Bros had already announced CVAs (the U.K. equivalent of Chapter 11) in the past two weeks but the collapse of Arcadia Group, owned by controversial billionaire Sir Philip Green
, and Debenhams, has underlined the depth of the crisis on Main Street.
Non-essential U.K. retailers have been forced to shutter their doors during a second lockdown that started on November 5 and ends tomorrow. But reopening has come too late for some of those already on the brink, it would seem.
Debenhams announced this morning that it is to start closing down its ailing business and shutter all of its 124 stores, with the potential loss of 12,000 jobs, after sports chain JD Sports ended discussions over a potential rescue deal for the department store chain.
JD Sports is widely believed to have terminated talks in part because international retail group Arcadia – best known for fast fashion brand Top Shop – has a large number of concessions within Debenhams stores and yesterday went into administration after days of intense rumors over its future.
The administrators for Debenhams had been seeking a buyer since the summer, but the sales process had “not resulted in a deliverable proposal” it said.
Liquidation specialist Hilco is managing the ongoing trading of stores to sell off remaining stock, while a buyer continues to be sought. However, without a buyer, once that stock has been sold the stores will shutter permanently. Closures are expected to start early in the New Year, with Debenhams likely to disappear from the U.K. after more than 200 years in business.
Over 25,000 Jobs Put In Doubt In Just Two Days
The collapse of the department store is far from a complete surprise. Debenhams went into administration in April for the second time in a year and has already closed 22 stores, with 28 more slated to close in 2021. Likewise, long-term problems at Arcadia Group were well known. Nonetheless, the difficulties at the two retail groups have put 25,000 more retail jobs at risk in just two days.
Geoff Rowley of FRP Advisory, the joint administrator to Debenhams, said: “All reasonable steps were taken to complete a transaction that would secure the future of Debenhams. However, the economic landscape is extremely challenging and, coupled with the uncertainty facing the U.K. retail industry, a viable deal could not be reached.”
With the exit of JD Sports, the most likely company to be interested in a significant number of stores is billionaire Mike Ashley’s
acquisitive Frasers Group, which upped its stake in Mulberry
Ashley has also been linked with the possible purchase of the Arcadia brands and reportedly had an offer to provide a $68 million loan to Arcadia - to give it breathing space so that the two parties could enter discussions - rebutted at the weekend. Ashley has a long-term interest in Debenhams and built a $136 million stake in the company, only to see that wiped out last year following a debt restructuring deal with the department store’s lenders.
However, Ashley’s top offer of $406 million for the business values it at less than half the price hoped for by the retailer’s owner. Several major U.K. fashion and department store chains, including John Lewis, Marks & Spencer and Next are expected to run the rule over prime Debenhams sites, though the former two may well have enough problems of their own.
More Retailers Face An Uncertain Christmas
The danger for the U.K. retail market is that the shock waves of the latest two retail collapses could act as a contagion. Just two weeks ago upscale brand Jaeger – owner of the Austin Reed and Jacques Vert brands - fell into administration along with fellow EWM Group value fashion chain Peacocks. On Friday last week, British men’s wear and suit hire retailer Moss Bros said it would propose a company voluntary arrangement as it had been severely impacted by Covid-induced lockdown measures.
The company, which has 800 employees, said its formal wear has been particularly affected due to the cancellation of weddings, school proms and major occasions including Royal Ascot.
According to the Centre for Retail Research, after 11 months this year 53 retail companies have failed in the U.K. compared with 43 in the whole of 2019. The previous worst years were 2008 and 2012, with 54 and 53 failures respectively. However, job losses have far exceeded any previous record, with Debenhams taking this year’s retail jobs lost or endangered soaring past 100,000.
U.S. retail brands J. Crew and Victoria’s Secret and Canadian footwear brand Aldo have all closed their British businesses this year.