Debenhams’ demise leaves 14m sq ft hole in high street

Debenhams has collapsed into liquidation as Covid lays waste to British retail, leaving hundreds of suppliers facing losses of up to £229m and blowing a 14m sq ft hole in high streets across the country.

The 242-year-old department store is to permanently shut its doors, putting 12,000 jobs at risk, a day after Sir Philip Green’s retail empire collapsed with 13,000 roles in danger.

All 124 Debenhams stores will be shut after remaining stock is sold off at discounts as high as 70pc. The chain – which has failed to find a new owner since it fell into administration in April – owes £229m to trade creditors, according to new documents filed at Companies House.

Some of the hardest hit suppliers will be beauty companies which once banked on the firm as a magnet for shoppers. In June Estée Lauder, Coty and Clinique were owed £2.8m, £1.4m and £1.6m respectively.

Read more: Debenhams launches pre-Christmas fire sale as liquidation looms

Debenhams’ liquidation is a further blow to the ailing high street and could spark a domino effect as footfall at smaller neighbouring shops plunges.

Richard Lim, chief executive of Retail Economics, said: “This is a truly devastating week … this puts up to 25,000 jobs at risk in just a couple of days.”

The retailer’s total shop floor space, which is now at risk of being abandoned, spans 13,628,740 sq ft according to consultants Local Data Company and Altus – the equivalent of 177 Premier League football pitches. Another 1,844,123 sq ft is at risk if all Arcadia stores close too.

Restructuring experts at Hilco will kick off a fire sale of Debenhams’ goods worth an estimated £300m when lockdown ends on Wednesday. There was already a virtual queue online last night as shoppers flocked to its website for bargains.

Administrators at FRP said: “On conclusion of this process, if no alternative offers have been received, the UK operations will close.”

Mr Lim added: “We can not overstate the significance of this collapse given the vast property portfolio, number of jobs impacted and the reverberations felt across the industry.

"The reality is that Debenhams has been outmanoeuvred by more nimble competitors, failed to embrace change and was left with a tiring proposition. The impact of the pandemic has accelerated its demise but underlying issues within the business were the root cause.”

Debenhams was the sixth largest clothing retailer in the UK five years ago but now no longer even sits in the top ten, GlobalData said. Like Arcadia, the chain struggled to compete with bargain fashion retailers such as Primark, Boohoo and Asos and failed to adapt quickly enough as shoppers moved online.

Onerous leases, some more than 20 years long, added to Debenhams’ woes – as did a mountain of debt that it was lumbered by under its private equity owners.

Sir Ian Cheshire, Debenhams’ former chairman, said that the company’s shops became a “straitjacket" and it would have been better off with just 70 branches.

Debenhams has been owned by hedge funds including Silver Tree and Golden Asset Management since a debt-for-equity swap last year which took it off the stock market. The deal wiped out equity investors including Mike Ashley’s Frasers Group, which had a £150m stake.

Mr Ashley has since repeatedly tried to take control of Debenhams, and had an offer to buy the firm rejected by FRP before liquidiation because it was less than half of the £300m asking price.

Frasers may yet table another offer for the retailer, although industry insiders have said the firm will now be more inclined to go after its best-performing stores. The likes of Next, B&M and Marks & Spencer are also expected to cast an eye over prime sites. The likes of Boohoo, which has been buying distresses brands from administrations but not their stores, could try to buy the website.

Chloe Collins, a retail analyst at GlobalData, said: “Debenhams’ store closures may be a saving grace for Marks & Spencer – 48.4pc of its UK clothing shoppers also bought fashion at M&S, so the latter is likely to benefit from transferred spend.”

The fate of Debenhams was sealed after JD Sports walked away from formal talks about a takeover bid on Tuesday.

It ended discussions in part due to uncertainty around Arcadia’s future, given Sir Philip’s brands are Debenhams’ largest concession holders. JD’s top brass was also spooked by the drop in the share price in response to a prospective takeover bid. The stock was down 11pc last week but rose 2.8pc on Tuesday.

Administrator Geoff Rowley, at FRP Advisory, said: “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.”

A spokesperson for the Debenhams’ pension schemes said they were being assessed by the pensions lifeboat since April last year, when Debenhams went ahead with a company voluntary arrangement.

An insider said the schemes are relatively well funded and unlikely to need a bailout.

Read more: Too little too late: the undignified demise of Debenhams