Debenhams faces uncertain future as JD Sports quits rescue talks
JD Sports has pulled out of talks over a rescue deal for department store chain Debenhams. It was the last remaining bidder for the firm, which is in administration, and up until the end of last week had been closing in on a deal.
But retail giant Arcadia is the biggest concession operator in Debenhams and its collapse is understood to have been a factor in JD Sports’ decision. Without a buyer, Debenhams could be wound down, risking thousands of jobs.
The company had already cut about 6,500 jobs since May, and now has 12,000 workers. The 242-year-old retailer had been considering a potential sale since the summer after it went into administration in April for the second time in a year.
The news that Arcadia has collapsed into administration, after the Covid-19 pandemic hit trading, has further complicated matters. The downfall of the Arcadia group puts 13,000 jobs at risk. The group, which runs 444 stores in the UK and 22 overseas, currently has 9,294 employees on furlough.
Arcadia’s brands, such as Miss Selfridge and Dorothy Perkins, are sold across Debenhams stores. They account for about £75m of sales. Former Debenhams chairman Sir Ian Cheshire told the BBC he felt “desperately sorry” for the thousands of employees who were worried about their jobs.
He said that Debenhams had been “caught in a straitjacket” with too many High Street outlets on long leases.
“You’ve got to be so much faster and so much more online,” he said, adding that the chain would have been better off with about 70 stores instead of the 130 it currently operates.
Shareholders in JD Sports had reacted badly to the news of the potential purchase of Debenhams, with the sports retailer seeing a sharp fall in its share price last week. That rebounded on Monday after weekend reports claiming that it was reconsidering its move.
JD Sports was widely seen as the last chance to save the beleaguered British chain. But in a short statement issued on Tuesday, JD Sports said that “discussions with the administrators of Debenhams regarding a potential acquisition of the UK business have now been terminated”.
If a buyer is not found for Debenhams, the firm could go into liquidation, or face being wound down. During that process, buyers would be sought for its shops and the business’s other assets, like stock.
Hilco Capital, a firm that specialises in winding up struggling retailers, was appointed by Debenhams in August to draw up contingency plans. Debenhams said at the time that it was “trading strongly”, despite having issued a string of profit warnings even before the pandemic hit. In recent years several big High Street names have struggled including Thomas Cook, Mothercare and Bonmarche as retailers try to adapt to the rise of online shopping and changing consumer habits.