Debenhams to close as talks collapse
Talks to save Debenhams have stopped following Arcadia going into administration
Last updated 24th May 2022
JD Sports has pulled out of rescue talks for troubled department store chain Debenhams, putting 12,000 workers at risk.
It was the last remaining bidder for Debenhams, which has been in administration since April, which looks like it will now close unless other options are found.
Debenhams has already cut 6,500 jobs across its operation due to heavy cost-cutting after it entered administration for the second time in 12 months.
Debenhams liquidations starts
The 242-year-old department store chain said its administrators have “regretfully” decided to start its liquidation process, while continuing to seek offers.
Debenhams said it will continue to trade through its 124 UK stores 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 statement.
It is understood that the collapse of the deal is partly linked to the administration of Arcadia, which is the biggest operator of concessions in Debenhams stores.
Arcadia going into administration
The future of Britain's High Streets again looks uncertain this morning, as the company which owns Topshop, Dorothy Perkins and Burton has gone into administration.
Arcadia Group, owner by Sir Philip Green, announced the collapse yesterday evening.
Why does Arcadia affect Debenhams?
Many of Arcadia’s staff worked at its brands’ concessions in Debenhams, which was hoping for a rescue deal after sliding into insolvency earlier this year.
However JD Sports have pulled out of talks to rescue the department store because potentially Debenhams could be without the Arcadia brands in-store.
In a brief statement to the London Stock Exchange, the company said:
“JD Sports Fashion, the leading retailer of sports, fashion and outdoor brands, confirms that discussions with the administrators of Debenhams regarding a potential acquisition of the UK business have now been terminated.”
What is happening with Arcadia's shops?
The high street giant, which includes the Topshop, Dorothy Perkins and Burton brands, has hired Deloitte to handle the next steps after the pandemic “severely impacted” sales across its brands.
Arcadia, which runs 444 stores in the UK and 22 overseas, said 9,294 employees are currently on furlough.
No redundancies have been announced as a result of the appointment and stores will continue to trade, the administrators said, with many due to reopen on Wednesday when England’s lockdown is lifted.
"It is crucial that the voice of staff is heard over the future of the business"
Ian Grabiner, chief executive of Arcadia, said:
“This is an incredibly sad day for all of our colleagues as well as our suppliers and our many other stakeholders.
“The impact of the Covid-19 pandemic, including the forced closure of our stores for prolonged periods, has severely impacted on trading across all of our brands.
“Throughout this immensely challenging time our priority has been to protect jobs and preserve the financial stability of the group in the hope that we could ride out the pandemic and come out fighting on the other side.
“Ultimately, however, in the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe.”
Will jobs be saved?
Retail trade union Usdaw has said it is seeking urgent meetings with Arcadia’s administrators in a bid to preserve jobs.
Dave Gill, Usdaw national officer, said:
“Now that Arcadia is in administration, it is crucial that the voice of staff is heard over the future of the business and that is best done through their trade union.
“We are seeking urgent meetings and need assurances on what efforts are being made to save jobs, the plan for stores to continue trading and the funding of the pension scheme.
“In the meantime, we are providing our members with the support and advice they need at this very difficult time.”
The administrators said they will be “assessing all options available”, which could see brands sold off in separate rescue deals.
Orders to still be honoured
Arcadia will continue to honour all online orders made over the Black Friday weekend and will continue to operate all of its current sales channels.
Matt Smith, joint administrator at Deloitte, said:
“We will now work with the existing management team and broader stakeholders to assess all options available for the future of the group’s businesses.
“It is our intention to continue to trade all of the brands, and we look forward to welcoming customers back into stores when many of them are allowed to reopen.
“We will be rapidly seeking expressions of interest and expect to identify one or more buyers to ensure the future success of the businesses.”
The government 'keeping a close eye'
Business Secretary Alok Sharma said he would be keeping a “very close eye” on the administrators’ report on director conduct, and pledged the Government would support the affected workers.
He tweeted:
“Within three months, the administrators have a duty to file a report on director conduct with The Insolvency Service – who will then determine whether a full investigation is required. I will be keeping a very close eye on this process.”
Mr Sharma added:
“This is a deeply challenging time for retailers and we remain fully committed to supporting them, including through an unprecedented package of business support worth £280 billion.”
Earlier on Monday, Mike Ashley’s Frasers Group said an offer for a £50 million lifeline for Arcadia was rejected.
It came as MPs called on Sir Philip to cover a shortfall in the pension scheme and urged the pension watchdog to fight on behalf of the group’s workers.
A spokesman for The Pensions Regulator said:
“We are aware of the challenges that the business is currently facing in these unprecedented times and we continue to work with the directors, the trustees and their respective advisers, as well as the PPF, to protect the position of the Arcadia pension schemes’ members to the fullest extent possible.”
Stephen Timms, chairman of the Work and Pensions Committee, called on Sir Philip to stump up funds to fill the pensions black hole, which is estimated to be as large as ÂŁ350 million.
A tough time for the High Street
It is the latest retailer to have been hammered by store closures during the coronavirus pandemic.
Rivals including Edinburgh Woollen Mill Group and Oasis Warehouse have fallen into insolvency since lockdown measures were first imposed in March.Some 13,000 staff of Sir Philip Green’s Arcadia Group face an anxious wait following the business collapsing into administration.
The high street giant, which includes the Topshop, Dorothy Perkins and Burton brands, has hired Deloitte to handle the next steps after the pandemic “severely impacted” sales across its brands.