Two spectacular bankruptcies, precipitated by confinement, shake British businesses. Monday, November 30, Arcadia, which has 500 stores, including the well-known Topshop brand, filed for bankruptcy. The next day, Tuesday 1er December, the Debenhams department stores, of which Arcadia is precisely the first tenant, were put into liquidation. In all, 13,000 and 12,000 jobs respectively are at risk. Behind them, the concern is to see many subcontractors themselves shutting down. “The systemic risk is enormous”, analyzes Flemming Bengtsen, the boss of Nimbla, a company that does credit insurance.
The situation is particularly worrying for Debenhams. A star brand from the 1990s, still a staple in British city centers today, its 124 department stores are set to close permanently once stocks have run out. “Everything has been tried to find a buyer who secures the future of Debenhams, but the economic situation is extremely difficult, and with the uncertainties facing British businesses, a viable agreement could not be found”, explains Geoff Rowley, who handles the liquidation process at FRP.
A disturbing game of dominoes
Debenhams, who was due to turn 250 in 2022, has been in serious trouble for years. It was weighed down with debt shortly before the 2008 financial crisis, did not invest enough and has little presence on the Internet. “We have known for years that [la mise en liquidation] was going to happen eventually, the Covid only accelerated the schedule “, analyzes David Fox, of Colliers International, an agency specializing in commercial real estate.
Ian Cheshire, the former chairman of the group, ousted in a shareholder revolt in 2019, is not surprised either. “The problem, and that was already true when I was there, is that there is a great business inside of it, probably 70 stores and the website. And I’m sure there will be a buyer for that ”, he told Sky News.
Shortly after the start of the pandemic in April, Debenhams filed for bankruptcy, but stores remained open while a buyer was sought. Only one serious candidate had come forward: JD Sports, a chain of 770 stores, which smelled the good deal.
Bad luck, Arcadia is very present in Debenhams. Its Wallis, Dorothy Perkins and Burton brands (which belonged to Debenhams in the 1980s) have numerous concessions there. Arcadia’s bankruptcy filing on Monday therefore changed the game. Now, collecting rents from these locations will be difficult. JD Sports announced in a one-line statement that it was withdrawing from the buyout process. Debenhams, who was reeling, collapsed.
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