NEWS DIGEST 01.12.2020: UK high street clothing store Debenhams on brink of collapse, Arcadia already on its way out

Good morning. Happy 1st of December. Our news today is taken from the Google News service. The UK retail industry, which has taken a huge hit from the coronavirus pandemic, suffered another huge blow, after it was announced that the Arcadia Group, which runs or manages concessions in famous high street names such as Debenhams and Topshop, is to fall into administration. Debenhams, a popular clothing outlet is on the brink of collapse, after sportswear retailer JD Sports pulled out of talks to offer a rescue package for the firm, Sky News reported. Debenhams has been trading for 242 years, and currently runs 128 British stores employing 12,000 staff, but the store has been experiencing financial trouble since April, due to a sag in consumer confidence and government health regulations such as lockdowns. JD Sports pulled out of talks to buy Debenhams after it was ‘spooked’ by news that Arcadia had collapsed, Sky News said. A statement from Debenhams was expected later today morning to clarify its position following JD’s decision. Its update to the City read: “JD Sports Fashion, the leading retailer of sports, fashion and outdoor brands, confirms that discussions with the administrators of Debenhams regarding a potential acquisition of the UK business have now been terminated.”Debenhams on the brink as JD Sports exits rescue talks after Arcadia’s collapse (Sky News)

Photo by Karolina Grabowska on Pexels.com

BBC News said that Debenhams now faces an ‘uncertain future’, with 12,000 jobs on the line, after JD Sports quit talks. JD was the latest remaining active bidder for the store chain, and had been closing in on a deal up until the end of last week, it was reported. The bidder had rescinded their interest after Arcadia Group went into administration. Arcadia does not own Debenhams, which is run by the consortium Celine, made up of lenders including Barclays, Bank of Ireland, Silver Point Capital and GoldenTree, but operates special concessions inside Debenhams stores, which form a significant partnership and revenue stream for both Arcadia and Debenhams. The latter has already let 6,500 of its workforce go since May, as customers are kept away by the virus and increased reliance on online shopping, reducing the need for physical stores, which the pandemic has only accelerated – Debenhams faces uncertain future as JD Sports quits rescue talks (BBC News Business)

The Guardian said that Debenhams will now most likely be wound down, with its assets stripped and its staff made redundant, in a tragic blow to the already bruised ‘high street’ retail environment. In addition to the collapse of this store chain, the implosion at Arcadia could see the 25,000 people employed at its brands, such as Topshop, Evans, Burton and Miss Selfridge, share the same possible fate as their peers in Debenhams. The collapse of both shopping giants has created ‘a real shock across the UK retail sector’, The Guardian said. According to the news agency Reuters, Debenhams administration process which will see the end of its operations is being managed by FRP Advisory. Geoff Rowley of FRP Advisory said that its administrators deeply regretted the decision to wind down the firm. He said: “All reasonable steps were taken to complete a transaction that would secure the future of Debenhams. However, the economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached. The decision to move forward with a closure programme has been carefully assessed and, while we remain hopeful that alternative proposals for the business may yet be received, we deeply regret that circumstances force us to commence this course of action. “We are very grateful for the efforts of the management team and staff who have worked so hard throughout the most difficult of circumstances to keep the business trading. We would also like to thank the landlords, suppliers and partners who have continued to work with Debenhams through this turbulent period and can reassure them that all contractual obligations entered into in the administration period will be met in full.”Debenhams to be wound down putting 12,000 jobs at risk – business live (The Guardian)

The Arcadia Group-Debenhams collapse has also sent shockwaves through the FTSE 100 index, with it set to fall slightly, although global shares are surging at the moment. London shares were being called down 42 points by the IG Index spread betting platform – FTSE 100 set to fall slightly but global shares set to end month on record surge. Traders eye fallout of Arcadia and Debenhams collapses (Evening Standard)

No amount of government help, furlough schemes, rent adjustments and other financial wizardry could put off the inevitable for Arcadia, says Geoffrey Smith of Investing.com. The UK retail sector has suffered loss after loss due to COVID-19, with Smith also writing that Arcadia and its stores did not help themselves by perpetuating a ‘increasingly dreary and downmarket British high street’. Smith also said that Debenhams was another ‘slow-moving retail dinosaur’ that was now heading for extinction, and the questions now for stock market investors were who will grow fat on the carcasses of the two businesses, and whether what is left to decompose on the high street will infect those that are still left – StockBeat: Frasers, JD Sports, Boohoo Set to Cash in on U.K. Retail Crisis (Investing.com)

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