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Debenhams steps closer to second administration in a year

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Debenhams has today filed its intent to appoint administrators, in a move that it says will protect it from being forced into liquidation while its 142 UK stores are closed in line with government Covid-19 advice. If it goes ahead with the plan, this could be its second administration in a year. 

The retail group plans a “light touch” administration that will leave its management team in place, under the control and supervision of administrators. Most of its UK staff are currently being paid by the government under its furlough scheme, and its Irish staff by the Irish government, and payments to suppliers will not be affected by the move. 

Debenhams plans to reopen its stores once government restrictions are open. While shops are closed, Debenhams will continue to trade online in the UK, Ireland and Denmark, processing customer orders, gift cards and online returns as normal. Its Danish business Magasin is also continuing to trade online while its stores are closed. 

Geoff Rowley and Alistair Massey of FRP Advisory have been appointed to advice on the possible administration. The groups says it has the support of its lenders who will provide the funding for the administration. 

Debenhams chief executive Stefaan Vansteenkiste said: “These are unprecedented circumstances and we have taken this step to protect our business, our employees, and other important stakeholders, so that we are in a position to resume trading from our stores when government restrictions are lifted. 

“We are working with a group of highly supportive owners and lenders and anticipate that additional funding will be made available to bridge us through the current crisis period. With their support and working with other key stakeholders, including landlords, pension trustees and business partners, we are striving to protect jobs and reopen as many Debenhams stores for trading as we can, as soon as this is possible.”

News of the potential Debenhams administration, comes almost exactly a year after it last took this route.  In April 2019 Debenhams promised business as usual for staff and customers after it was sold to its lenders in a pre-pack administration. It planned to use the approach to press on with transformation that has so far involved closing 23 of its then-165 shops, as it planned for a future in which it expected 30% of its business to take place online, mostly via mobile. 

Sofie WIllmott, lead analyst at data and analytics business GlobalData, has said an administration would merely delay the inevitable.

“Placing Debenhams into administration for the second time within twelve months will tide it over for now, freeing it from debts but ultimately its owners are merely stringing out its demise and its long-term future remains bleak,” she said. “With significant further investment in the business now very unlikely, it is difficult to see what will attract shoppers back once its stores can reopen.

“The department store chain was in already trouble before the Covid-19 pandemic hit and the sharp shift in consumer shopping habits will only speed up inevitable changes in the UK market. Weaker retailers without a unique selling point will be weeded out, with many unable to survive the year.”

Image: InternetRetailing Media/Paul Skeldon

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