Debenhams into administration
Friday 12 April 2019
AS UK Department Store icon Debenhams announces the company is in the hands of lenders, it’s unsure what this means for the future of this much-loved shopping destination, and also the Great British High Street.
Dr Gordon Fletcher, a senior academic at the Salford Business School feels that by Debenhams taking a different approach to previous failed High Street stores, the visible changes impacting the customer may be few-to-none. While this may be the case, Dr Fletcher identified that previous examples of this business tactic have merely helped slow the inevitable collapse of a company.
Dr Fletcher said: “With Debenhams being sold to its lenders arguably nothing has changed on the high street today. Fifty stores were already earmarked for closure and although these may now be accelerated, the attempt to stave off complete collapse comes as no surprise. The company is still burdened with the legacy of significant long term rental agreements coupled with a retail offering that is slow to change and, put bluntly, just safe.
“Today’s pre-packaged administration agreement means that the lenders will want to rapidly sell the chain to the highest bidders as an ongoing concern. Before any potential buyers can be found there will certainly be a need for a company voluntary arrangement (CVA). The CVA is needed to help Debenhams shed some of its high rental costs. The warning signs are also there that there may worse still to come. Previous CVAs used by other high street retailers for the same reasons have merely slowed the march to complete closure. In this way, today’s administration announcement may have already signalled the end of the traditional department store on the high street as we know it.
“Although Debenhams itself must now change in response to today’s change in ownership this is itself is also a threat to the wider high street. As an anchor tenant in many suburban and city centres, Debenhams plays a key role in drawing visitors to these locations. A department store brings reassurance and their wide range of items that means that visitors can satisfy a range of their needs alongside visits to other more specialist offerings. Anchor tenants are also large employers which means that the wages and their employees itself helps to sustain smaller stores in the same location. If Debenhams has to transform to make itself more appealing to new and existing generations of consumers then this change has repercussions for the entire high street.”