Video report by ITV News Business and Economics Editor Joel Hills
Debenhams has spent the last 18 months lurching from one insolvency process to another, closing shops, cutting rent and laying off staff.The owners, a group of banks and hedge funds lead by Silver Point Capital, insist their turnaround plan was derailed by coronavirus.Fair enough, but all retailers are sailing in the same rough seas - and not everyone is sinking.
Debenhams was a victim of the virus but also its inability to move with the times. The company struggled under the weight to two problems: too much debt and too many long-term leases for shops it didn’t need in the digital age.
Sir Ian Cheshire was chairman of Debenhams from April 2016 until January 2019. I asked him when he first realised the company was in trouble. “The day I walked in,” he replied.
“I think what became clear quite quickly was that there was a great business - 70 stores and the website would have been a very viable business - but we couldn’t get the landlords to take back the 120 stores we didn’t need. At that point you are really stuck. It’s the leases that created the straight-jacket.”
Cheshire believes parts of Debenhams, its online business in particular, will survive intact.
Retail is not dead; not everyone is having a bad time. Next, B&Q and Primark are managing to chart a course through.
But coronavirus has caused havoc. A trend towards shopping online has been turbo-charged during lockdown. At one point £1 in every £2 was being spent digitally.Business models which looked wobbly at the beginning of the year have since buckled.TM Lewin, Cath Kidston, Oasis, Warehouse, Laura Ashley, Edinburgh Woollen Mill, Peacocks and Jaeger have all ended up in administration, along with Arcadia.
The Centre for Retail Research calculates that 140,437 jobs have gone in retail so far this year. It predicts that will rise to 235,000 by the end of December.“This is the worse you’ve ever seen, it’s a once in a hundred years event,” says Sir Ian Cheshire.
“The shift to the internet, the cost of bricks and mortar retail, have been amplified by a sudden five to 10 years burst of change.”Retail is going through a period of painful adjustment. Many more people look set to lose their jobs in the months to come, they will need help get back into work.
Joel Hills on a tough year for retail