Debenhams is set to plunge into administration as shareholders attempt to keep the historic retailer out of creditors’ hands during the coronavirus outbreak, it is reported.
Debenhams is poised to announce its intention to appoint administrators next week, with KPMG in the running, Sky News reported today.
Investors could push for the move to prevent Debenhams’ lenders making legal claims on the department store chain amid the UK coronavirus crisis.
Having shuttered 142 stores across the UK during the lockdown, Debenhams has placed most staff on the government’s job retention scheme.
That means the government will pay up to 80 per cent of their wages for at least the next three months.
Sources told Sky News Debenhams’ online operations could continue.
But it has ordered hundreds of millions of pounds worth of inventory from suppliers that it will not be able to sell.
A source said this meant suppliers could take legal action against Debenhams for delaying invoice payments.
Administration ‘would protect’ Debenhams
But another source said putting Debenhams into administration would not necessarily lead to its collapse.
“It would be a way of protecting the balance sheet during a period of vastly reduced revenue,” they said.
A Debenhams spokesperson told Sky News: “Like all retailers, Debenhams is making contingency plans reflecting the extraordinary current circumstances.
“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 on ‘shaky ground’
“This one has been on the cards for a while,” Nigel Frith, a senior analyst at online trading platform Ask Traders, said.
“We aren’t quite at the administration stage, but it is definitely an option on the table to protect Debenhams from legal claims from creditors that it owes money to during the coronavirus outbreak. Next week will be judgement week for Debenhams.”
“Debenhams was already on very shaky ground prior to the coronavirus outbreak,” he added. “[So] 2020 was going to be its make or make 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 lock down ends.
“What we are seeing here is simple – if a firm was in a weak position going into the coronavirus lockdown, there is a good chance that it won’t come out the other side. In recent years fast fashion and online businesses have thrived, whilst our more traditional brands have struggled to transform.”