Debenhams prepares for another administration

By guest author Elias Jahshan from Retail Gazette

  • Debenhams prepares to file for notice of administration as early as next week
  • KPMG understood to be standby to handle the process
  • However, a firm decision to file for administration has yet not been made
Caption courtesy by Retail Gazette

Debenhams is reportedly preparing to line up administrators as early as next week, as the 242 year-old department store chain continues to struggle amid the coronavirus pandemic.

According to Sky News, Debenhams could file a notice of intention to appoint administrators next week, and it is understood that accountancy firm KPMG was on standby to handle the process.

The prospective appointment would be designed to protect Debenhams from legal claims from creditors during the Covid-19 pandemic.

However, a firm decision to file for administration has yet not been made, meaning an alternative outcome was still possible.

Nonetheless, should administrators be appointed it would mark 12 months since the struggling retailer last fell into administration, after which its current owner – a consortium of banks and lenders known as Celine – launched a CVA within the same month.

The potential administration would also come just days after Debenhams put the vast majority of its workforce on furlough after it was forced to temporarily close its stores amid the coronavirus pandemic.

The wages of staff on furlough are being covered for three months by the government’s Coronavirus Job Retention Scheme.

The department store, which employs around 22,000 people, said it intended to reopen the business after the lockdown and will continue to trade online in the time being.

“Like all retailers, Debenhams is making contingency plans reflecting the extraordinary current circumstances,” a spokesperson told Retail Gazette.

“Our owners and lenders remain highly supportive and whatever actions we may take will be with a view to protecting the business during the current situation.

“While our stores remain closed in line with government guidance, and the majority of our store-facing colleagues have been furloughed, our website continues to trade and we are accepting customer orders, gift cards and returns.”

Debenhams has hundreds of millions of pounds of inventory on order from suppliers that it no longer requires due to the government-mandated order that all non-essential shops must shut to help curb the spread of Covid-19.

In addition, last month the retailer wrote to landlords asking for a five-month rent holiday and additional store closures as part of its ongoing CVA launched a year ago,so as to avoid becoming the next retail casualty from the pandemic.

Debenhams fell into administration in April last year after a tumultuous period that saw retail tycoon Mike Ashley, who was the department store chain’s biggest shareholder, attempt a boardroom coup before Celine took control.

The CVA, which was approved a month later in May, included rent cuts of 25 % to 50 % on some stores and around 50 stores earmarked for closure.

The first tranche of store closures – 22 sites – took place in January, well before the coronavirus outbreak became a pandemic and sent the UK into a state of crisis.