The future of around 25,000 retailing jobs in Britain hangs in the balance after the failure of two long-established companies laid bare the fragility of much of the sector during the coronavirus pandemic.
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Long-suffering Debenhams, the 242-year-old department store chain, said Tuesday that administrators had decided to start winding down operations after a potential buyer of the company pulled out. The move looks like it will cost 12,000 jobs.
It was another devastating blow to the sector, coming just hours after Arcadia Group, the retail empire of billionaire Philip Green, went into administration, a type of bankruptcy protection, late Monday.
Both companies are set to reopen their doors in England on Wednesday when they emerge from a near month-long lockdown that forced the closure shops selling items deemed to be non-essential, including clothes. Since the pandemic took root in March, the UK has forced the closure of retailing outlets in various ways.
For Debenhams, the reopening of its 124 UK stores is not expected to last long even though the administrators said they will continue to seek offers “for all or parts of the business” while they start selling off stock and liquidating the business.
Arcadia's stable of brands, which includes the likes of Burton, Miss Selfridge and Topshop, could still have a future and administrators are seeking buyers for all or parts of the company.
Retail experts said the pandemic and the associated restrictions only tell part of the problems facing the companies. Both have struggled to respond to the increased competition from low-cost rivals like Primark, as well as from online retailers.
It looks like a sad end for Debenhams, which can trace its history back to 1778 when William Clark set up a store in London’s West End selling fabrics, bonnets, gloves and parasols. In 1813 William Debenham invested in the firm, which became Clark & Debenham. By 1950, the renamed Debenhams was one of the largest department store groups in the UK.
Retail chain JD Sports had been mulling an offer for Debenhams but pulled out after Arcadia said it was going into administration. Arcadia is the biggest operator of concessions in Debenhams department stores, so its potential collapse affected Debenhams' appeal.
Debenhams, which went into administration in April, has already axed 6,500 jobs. It said it will continue to trade both in-shop and online to clear its current and contracted stocks.
“On conclusion of this process, if no alternative offers have been received, the UK operations will close,” the company said in a statement.
Geoff Rowley of FRP Advisory, which is joint administrator for Debenhams, said “the economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached.”
Around 12 hours earlier, Arcadia called in administrators from Deloitte. It said the forced closure of its stores over long periods this year had “severely impacted” on trading.
As well as suffering from the pandemic, critics have said the 68-year-old Green, who has been embroiled in a series of controversies over the past few years, hasn’t invested enough in the businesses to get them in shape to deal with new, nimbler online competitors.
“Arcadia has suffered against these emerging players because the company was slow to develop an innovative and user-friendly online offering as well as a strong brand narrative and social media presence,” said Nina Marston, fashion and luxury analyst at Euromonitor International.
Unlike Debenhams, there are hopes that something can be salvaged from Arcadia and Deloitte's Matt Smith said he expects “to identify one or more buyers to ensure the future success of the businesses.”
Arcadia, like Debenhams, has a long history, tracing its roots back to the early 1900s, when 18-year-old Lithuanian émigré, Montague Burton, arrived in Britain. Brands were added to the Burton menswear business before the umbrella company Arcadia was formed in 1997. Green took the company over in 2002 and in the first few years, his stewardship won him admirers, helping his brands to link up with the likes of supermodel Kate Moss and singer Beyonce.