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UK discount retailer Wilko has collapsed into administration, putting around 12,500 jobs at risk after rescue talks with prospective suitors failed.
Chief executive Mark Jackson said on Thursday that management and advisers had left “no stone unturned when it came to preserving this incredible business” but added that time “has run out and now, we must do what’s best to preserve as many jobs as possible, for as long as is possible.”
The news comes after the chain filed a notice of intention to appoint administrators a week ago in an effort to keep creditors, including landlords and suppliers, at bay while insolvency practitioners at PwC sought to find a last-minute buyer or investor. They have now been appointed administrators.
Wilko’s demise makes it one of the biggest retail casualties in the UK in recent years following the collapse of Sir Philip Green’s retail empire and department store chain Debenhams.
The family-owned chain started life as a single hardware store in Leicester in 1930, before capitalizing on the rise of DIY as a leisure activity in the following decades and expanding to 400 stores.
However, Wilko has faced increasing competition from nimbler rivals in recent years, leaving it grappling with lackluster sales amid mounting cash and inflationary pressures. It fell to a £36mn pre-tax loss in the year to January 2022 from a £3.2mn profit the year before, according to its most recent accounts filed at Companies House.
Despite its recent travails, Wilko paid its owners £2.25mn in dividends in the year to the end of January last year and a further £750,000 in February 2022.
The administrators are hopeful that between 200 and 300 stores could be saved by the end of next week, according to people familiar with the talks. They added that two rival discount chains have expressed interest as well as a couple of financial suitors that had dropped out of the process before Wilko collapsed. PwC declined to comment.
Jackson said Wilko’s senior team had fought “very hard” to keep the business intact but that a formal administration process was inevitable. In an open letter to staff, he said that despite a “significant level of interest in the business”, it was unable to secure a deal within the required 10 business days from the date it filed its notice of intention to appoint administrators at the High court
Last year it borrowed £40mn from restructuring specialist Hilco, which owns Homebase and Cath Kidston, as it deferred some payments to suppliers and landlords. It also sold and leased back its distribution center in Nottinghamshire for £48mn to pay down some of its debt and has been reducing its headcount.
In recent months, the chain also explored whether to launch a so-called company voluntary arrangement to allow it to seek rent cuts from landlords.
PwC is expected to run a further sales process but will ultimately liquidate the chain if no solution is found.
“Initially, Wilko will continue to trade all stores without any immediate redundancies. . . if buyers for some or all of the group are not found, it is likely that store closures and redundancies will follow,” PwC said.
Vernon Dennis, restructuring and insolvency partner at law firm Howard Kennedy, said: “A cash flow crisis such as this will quickly lead to insolvency, irrespective of the underlying value of the business and its proposition. As access to readily available capital dries up because of wider macroeconomic conditions, we are likely to see more retail casualties.”