Wilko has formally collapsed into administration, appointing PwC to lead the process, as 12,000 jobs are put at risk.
The retailer had been trying to broker a solvent rescue deal since it filed a notice of its intention to appoint an administrator last Thursday.
The chain said it had “a significant level of interest, including indicative offers”, however it was unable to complete the deal within the necessary timeframe.
“Given the cash position, we’ve been left with no choice but to take this unfortunate action,” said Wilko CEO Mark Jackson.
It was in talks with private equity firms Laura Ashley-owner Gordon Brothers, Bensons for Beds-owner Alteri, and OpCapita, as well as a rival retailer.
Jackson said: “Over the past six months Wilko has been very open that we’ve been considering options to accelerate a turnaround plan given that we needed to make significant changes to the way we operate to restore confidence and stabilise our business.
“We left no stone unturned when it came to preserving this incredible business but must concede that with regret, we’ve no choice but to take the difficult decision to enter into administration.”
Wilko will continue to trade all stores without any immediate redundancies as discussions with interested parties continue.
PwC partner and joint administrator Zelf Hussain said: “We know that the appointment of administrators, which comes during an already challenging time for many, will be an unsettling development for everyone involved with the business – particularly its committed team members – and the communities it serves.
“As administrators we will continue to engage with parties who may be interested in acquiring all or part of the business. Stores will continue to trade as normal for the time being and staff will continue to be paid.”
Wilko, which was founded in the 1930s in Leicester and grew to 400 stores, has been struggling for some time.
Its cash flow issues became evident last year when it deferred supplier payments and asked landlords to move to monthly rents.
It was dealt a major blow when credit insurers Allianz Trade and Atradius pulled cover in October.
This has made life difficult for Wilko ever since with many suppliers demanding payment for goods upfront, which led to poor availability across its stores for the past year.
It was given a lifeline when it secured £40m in funding from restructuring specialist Hilco late last year, and new CEO Jackson, who took the helm late last year, sought to cut costs and rebuild funds by axing more than 400 jobs and selling its Worksop distribution centres.
Jackson said: “Since January and with the help of retail advisers and experts, we’ve been facing into problems and have seen real progress against many areas of our plan.
“We’ve made significant savings across our cost base and have been considering various options based on advice given regarding our store costs.”
“We’ve all fought hard to keep this incredible business intact but must concede 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, by working with our appointed administrators.”
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Wilko fell behind the value competition
Wilko had filled the gap left by the collapse of Woolworths in 2008, but has since faced increasing competition from other value retailers, such as B&M, Poundland and Home Bargains, which have all been in expansion mode and have stolen market share from the retailer.
GlobalData retail research director Patrick O’Brien said that its rivals “really eroded its competitive position and undercut Wilko on price”, which has created long-term damage to the business.
Since 2015, B&M, Home Bargains and The Range have all overtaken Wilko for non-food market share with Wilko the only one of these retailers not to gain share over this period, according to GlobalData.
Wilko recorded sales declines in its last four financial years, with revenue falling by 18.6% between 2017/18 and 2021/22.
Meanwhile, the £35.9m loss it made in its last financial year, was more than its operating profit from the previous four years.
GlobalData senior data analyst Matt Walton said that the retailer has been “caught in a pincer movement” on both price and design.
“It has been outflanked on price by the likes of B&M, Home Bargains and The Range while it is unable to compete on design with the likes of Dunelm or Ikea.”
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6 Comments. Leave new
One area for some further scrutiny is whether Hilco uses its secured debt position to appoint PwC, who in turn, as a thank you, could appoint Hilco’s retail arm to do the store closures. I suspect Hilco would recover full value + interest on the facility, generate a material fee on the store closures and use the opportunity to dump their own stock through the closure stores. A novel take on the old “loan to own” approach
Yes, as collateral the Wilko name was used to get the £40M loan from Hilco, the distribution was sold and leased back with DHL so essentially Wilko was doomed it owns nothing but a tissue of debts and leases to stores in low footfall upwards only rents. Wilko painted itself into a corner.
Only one DC was sold. The one in Worksop. A second DC is/was fully operational in Magor, South Wales and is more modern and possibly more valuable than the Worksop base.
Jack when was the last time Hilco actually helped a company rather made money from its misfortune and suffering? Perhaps only HMV and Homebase in the past decade come to mind? Often they come in, asset strip – in some cases have their ‘appointees’ selling stuff cash in hand out the door for their own pocket, then leave the site empty and the company gutted. Horrific company.
The staff will be gutted, but I blame this entirely on owners and mis-management.
The CEO should be apologising in his “open letter”, not thanking customers and staff who may be about to lose their obs.