COVID-19: Debenhams prepares for ‘light touch’ administration
On March 23, Debenhams closed all 142 of its UK stores in line with government advice regarding the COVID-19 pandemic but said it hoped to reopen its network as soon as was “practically and safely possible”.
‘Light touch’ administration preparation
In a company statement issued today, Debenhams said it had now filed a Notice of Intent (NOI) to appoint an administrator in the UK – a move that would provide “protection from creditors in the short-term” and “ensure business is able to trade its stores again after the lockdown period”.
Adding further detail, it said: “This move will protect Debenhams from the threat of legal action that could have the effect of pushing the business into liquidation while its 142 UK stores remain closed.”
Debenhams said it was “making preparations to resume trading” once restrictions were lifted and the NOI was a “first necessary step” in this process.
“The group is preparing to enter a ‘light touch’ administration that will see the existing management team remain in place under the direct control and supervision of the administrators. The group has the support of its lenders and they plan to provide the funding for the administration.”
Debenhams CEO Stefaan Vansteenkiste said the decision had been made to protect business, employees and other important stakeholders amidst “unprecedented circumstances”.
“We are working with a group of highly supportive owners and lenders and anticipate that additional funding will be made available to bridge us through the current crisis period. With their support and working with other key stakeholders, including landlords, pension trustees and business partners, we are striving to protect jobs and reopen as many Debenhams stores for trading as we can, as soon as this is possible,” Vansteenkiste said.
Beauty represents 25% of total Debenhams sales
Debenhams housed a wide range of prestige beauty brands in store and online, including Armani, Chanel, Dior, Tom Ford, Benefit, Mac and Kiehl’s, among others. According to the company, beauty typically represented 25% of total group sales and during the current and ongoing coronavirus lockdown, beauty had remained a strong mix within overall online sales.
The department store continued to trade online across the UK, Ireland and Denmark, in line with government guidelines, while the coronavirus business lockdown continued and customer orders, gift cards and returns were being “accepted and processed normally”.
Debenhams said in-store counters remained important as this model facilitated cross- and up-selling, as well as new product launches, and whilst it had its ‘Beauty Club Community’ digital page, it remained hard to replicate the expertise of in-store brand representatives online.
The majority of Debenhams’ UK employees were currently being paid under the government’s furlough scheme during the temporary store closures.