As the coronavirus crisis continues to put pressure on retail, Debenhams is entering its second bankruptcy in the past 12 months.
The British department store chain announced today that it has appointed administrators “in order to protect the business” as its 142 U.K. outposts remain closed due to the government’s effectual lockdown. The administrators will adopt a “light touch” approach, working with the existing management “to get the business into a position to reopen and trade as many stores as possible again when restrictions are lifted.”
As the lockdown continues, Debenhams is continuing to sell online in the U.K., Ireland and Denmark while following government guidelines. The retailer anticipates that its operations in Ireland will be liquidated by its administrators. Debenhams has suspended trading in its 11 Irish outposts — most of which it expects will not reopen — and has placed impacted workers on furlough under Ireland’s payment support scheme. The liquidation is expected to lead to the loss of about 1,400 jobs.
“In these unprecedented circumstances, the appointment of the administrators will 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 desperately sorry not to be able to keep the Irish business operating but are faced with no alternative option in the current environment. This decision has not been taken lightly and is [in] no way a reflection on our Irish colleagues, whose professionalism and commitment to serving our customers has never been in question.”
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 majority of the company’s estimated 20,000 workers are furloughed and receiving payment through the British government’s “furlough scheme.” Under this scheme, the government pays 80% of salaries for workers at coronavirus-impacted companies.
The department store is not alone in facing financial headwinds amidst the coronavirus outbreak. Fellow British retailer Laura Ashley declared insolvency in March, blaming the virus for its ultimate demise. And according to a Global Data report from March, one-fifth of U.K. fashion spend could be wiped out for 2020 because of the coronavirus. Global Data added that apparel and footwear sales could fall by 11.1 billion pounds ($13.5 billion) in 2020 compared to 2019.