Debenhams, the well-established department store chain that has been in operation for 242 years, is reportedly contemplating a second administration filing due to the ongoing impact of the COVID-19 pandemic on the UK retail sector. Speculation suggests that the filing may occur as early as this week. With approximately 22,000 employees, Debenhams is currently facing financial challenges, and its situation has been further worsened by missing a pension top-up payment.
While Debenhams has not revealed any specific details about its plans, it is expected that KPMG will handle the administration process. However, a spokesperson for the company has reassured stakeholders that they are actively making contingency plans to safeguard the business during these unprecedented circumstances. The spokesperson also noted that the owners and lenders continue to provide strong support.
According to reports from The Telegraph, Debenhams also failed to make its pension fund deficit payment in April. However, the company denies any attempts to offload its pension responsibilities. If Debenhams does proceed with the administration filing, it is anticipated to follow a pre-pack administration strategy, with the current owners (a consortium that took control last year) planning to repurchase the business. Ongoing discussions are taking place between the owners and the chain’s management to secure additional funding and continue the current turnaround efforts after the UK lockdown ends.
This potential administration filing comes as a significant setback for Debenhams, which believed it had resolved its issues following its previous administration filing in 2019. Just recently, the company was forced to furlough most of its workforce after closing all of its 142 UK department stores. Consequently, the responsibility of paying the employees now lies with the UK government, which has pledged to cover 80% of salaries up to a maximum of £2,500 per month.
Some industry analysts argue that a substantial cash injection is crucial for Debenhams if it aims to survive in the long term. Sofie Willmott, Lead Analyst at GlobalData, suggests that the administration filing may provide temporary relief by alleviating the burden of debts, but without additional funding, it may only delay the inevitable. Willmott further emphasizes that Debenhams needs to identify a stronger unique selling point to thrive in a retail market experiencing significant changes due to evolving consumer shopping habits.
The future of Debenhams is uncertain, as the COVID-19 pandemic has exacerbated the already existing challenges faced by the struggling retailer. It remains to be seen if Debenhams can traverse these turbulent times and secure its position in the UK market. A strong and strategic approach will be crucial for the survival and future success of the iconic department store chain.
1. [The Telegraph: Debenhams contemplates second administration](https://www.telegraph.co.uk/business/2020/04/26/debenhams-contemplates-second-administration/)
2. [GlobalData: Challenges faced by Debenhams in the retail market](https://www.globaldata.com/challenges-faced-by-debenhams-remain-unresolved-in-a-declining-uk-clothing-market-says-globaldata/)