Debenhams has today appointed administrators, having given notice of its intent to do earlier this week. The move comes a year to the day after it last went into administration.
Geoff Rowley and Alastair Massey of FRP Advisory have been appointed to oversee the administration of the UK business. Its 11 Republic of Ireland shops are not expected to reopen however, and affected staff have been put on temporary layoff under the Irish Government’s payment support scheme.
Debenhams says the move will protect its UK business from being forced into liquidation while its 142 in this country are closed in line with government Covid-19 advice. Administrators are set to run a “light touch” administration that will leave its management team in place, under the control and supervision of administrators, and able to get the business into a position where it can re-open and trade “as many stores as possible” once government restrictions are lifted.
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 the retailer says payments to suppliers will not be affected by the move.
In the meantime, 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.
Debenhams chief executive Stefaan Vansteenkiste said: “In these unprecedented circumstances the appointment of the administrators will 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 anticipate that our highly supportive owners and lenders will make additional funding available to fund the administration period. We are desperately sorry not to be able to keep the Irish business operating but are faced with no alternative option in the current environment. This decision has not been taken lightly and is no way a reflection on our Irish colleagues, whose professionalism and commitment to serving our customers has never been in question.”
Non-executive board members Kevin Conroy, Dr. Beatrice Lafon, Stephen Sunnucks and John Walden have all resigned from the board, having been hired near the end of 2019 to help lead the growth of Debenhams, following the completion of its restructuring. "Due to the unforeseen COVID-19 pandemic their role will not be required during an administration period," said Debenhams in a statement. "As a group they remain supportive of Debenhams’ future and look forward to its reemergence."
News of the potential Debenhams administration, comes almost exactly a year after it last took this route. On April 9 2019 it 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.
Nigel Frith, a senior market analyst at AskTraders, said: ”It’s done. Debenhams were already on very shaky ground prior to the coronavirus outbreak, and 2020 is unfortunately looking like its break year. However, Covid-19 has brought all the retailers’ problems to head a little earlier than expected. After 242 years on the high street, there is a good chance that many, if not all of the department stores’ doors won’t be opening after the UK wide lockdown ends.”
He added: “What we are seeing here is simple - if the firm was in a weak position going into the coronavirus lock down, there is a good chance that it will not be coming out better the other side - and it’s looking like it won’t be. In recent years fast fashion and online businesses have thrived, whilst our more traditional brands have struggled to transform and adapt with the current economic climate.
“So far, they have now entered administration, but it does certainly look like the end for Debenhams. What once was a thriving high street store is now on the brink of collapsing, taking all 22,000 jobs with it."
Debenhams is a Top50 retailer in RXUK Top500 research.
Image: InternetRetailing Media/Paul Skeldon