Debenhams today filed a notice of intent to appoint an administrator in the United Kingdom — marking the company’s second time on the brink of bankruptcy in the past year.
The British retailer’s fleet of 142 stores in the U.K. are shut because of the nationwide lockdown in response to the coronavirus pandemic. The company says it is planning to enter a “light touch” administration that will see the existing management team continue under the control and supervision of the administrators.
“These are unprecedented circumstances and we have taken this step to protect our business, our employees, and other important stakeholders, so that we are in a position to resume trading from our stores when government restrictions are lifted,” said Debenhams CEO Stefaan Vansteenkiste. “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.”
The department store chain says its lenders have said they will provide funding for the administration. The company will continue to pay suppliers as scheduled during the administration and is still selling products online across the U.K., Ireland and Denmark, in accordance with government guidelines. The majority of Debenhams’ 22,000 workers are furloughed and receiving payment through the government’s “furlough scheme.” Under the scheme, the government pays 80% of salaries for workers at coronavirus-impacted companies.
Debenhams fell into administration about one year ago, faced with digital disruption and uncertainty surrounding the U.K.’s exit from the European Union, which took place in January.
The department store is not alone in facing financial headwinds amidst the coronavirus outbreak: According to a Global Data report from March, one-fifth of U.K. fashion spend could be wiped out for 2020 because of the virus. The report further predicted that apparel and footwear sales could fall by 11.1 billion pounds ($13.5 billion) in 2020 compared to 2019.
Coronavirus Forces Laura Ashley Into Insolvency
Stock Futures Surge on Signs the Coronavirus Pandemic May Be Stabilizing