Commercial Casualties of Covid

The Corona Virus pandemic has brought about exceptional social and economic disruption on an unprecedented scale. The effects will be felt for years, if not decades to come. There is never a good time for a pandemic, and few business owners had thought to even mutter the word in a commercial context before 2019. For some businesses, the pandemic was an unbearable burden that could not be traded through. For others, it was the final blow to an already frail empire. We take a look at some of the most significant commercial casualties of the pandemic to date:

Jessops: still a formidable high street name today, Jessops entered administration in 2019 after a sharp decline in profits. It entered a company voluntary arrangement in 2021 and reduced rents on the remaining 17 stores. The directors know a prominent online retail presence can futureproof a business and quickly become its saviour in challenging times. Corona Virus legislation has provided useful protection for businesses at the mercy of national and global events. Jessops has faced administration on several occasions in its eight decades of trading. Historically Jessops have been able to rise, rebuild and recover which bodes well for this latest battle.

Arcadia: unable to compete with online retail despite operating several very well-known high street brands, the company entered administration at the end of 2020 following two national lockdowns. Six of the brands have been bought by two online retail specialists, at the expense of up to 5,000 retail jobs and potentially 284 empty stores.

Age UK: to survive pandemic pressures, the charity Age UK closed a third of its outlets in 2020 and had up to 70% of staff on furlough. Like with most charities a vital revenue stream was cut off during lockdown. Withdrawing services to balance the books was never an option for Age UK. Having been on the brink of bankruptcy the outlook is now much brighter for stores, staff and the people who depend on their invaluable services.

Bertram Books: as only one of two book wholesalers selling to retail, their collapse in 2020 sent shockwaves through the industry. Small independent publishers relied on Bertram to compete against well-funded industry titans. The temporary closure of libraries and non-essential shops during the first national lockdown sounded the death knell for a business already unable to compete with online B2C rivals. With debts of £25 million and a legacy of missed opportunities by previous owners, the Bertram were already vulnerable.

Brighthouse: is a trading style of Caversham Finance. They were the UK’s largest rent-to-own retailer enabling people on low incomes to access domestic appliances and furniture. In 2017 the FCA ordered the company to pay £14.8 million as financial redress spread over 240,000 customers. Combined with difficult trading conditions, high rents and losses exceeding £30 million the company was teetering on the edge. It was decided the 200 plus stores would not reopen when the first lockdown of 2020 ended. Existing customer finance and warranty agreements are still being honoured by the administrators. The outlook for the £23.8 million of unsecured creditors is not bright.

Debenhams: having endured two recent periods of administration the 243-year-old department store was wound up in 2021. Debts were in the region of £321 million and losses surpassed £490 million. Although the portfolio of bricks and mortar stores is being sold ending a physical store presence, the brand is now reborn online. Debenhams has a potted history of different owners over the centuries. Their current custodian has a proven track record of online success geared towards the post-pandemic world.

Intu Properties: known as Capital Shopping Centres until a rebrand in 2013, Intu were a real estate investment company. They operated some of the UK’s biggest shopping centres in a portfolio spanning 17 sites. Hampered by a loss of £2 billion in 2019 and the 2020 pandemic prompting retailers to delay rent payments, Intu entered administration in 2020. Shouldering debts of £4.5 billion the administration is set to continue for some time.

JTF Wholesale: before the pandemic struck this East Midlands based discount retailer was already struggling to turn a profit. Year-End 2019 accounts showed losses approaching £3 million. JTF were one of a handful of retailers requiring customers to be members via subscription to buy discounted goods. Impacted heavily by the pandemic, a buyer was initially found. Sadly, the buyer withdrew resulting in the company being placed into administration a month after England’s so-called ‘freedom day’ of 2021. With £3.8 million owed to trade creditors and an estimated deficiency to all creditors of £11.3 million, the assets are being sold and some sites are being taken over by rival retailers.

Paperchase: with over £73 million owed to creditors, the upmarket stationery retail chain went into administration at the start of 2021. Prior to this a company voluntary arrangement had successfully completed in 2019. The pandemic could not have struck at a worse time for Paperchase. As a non-essential retailer, stores were shut during peak season. A pre-packed administration deal has at least given hope the brand can continue.

T M Lewins: the menswear retailer entered administration in 2020 with the pandemic seen as the straw that broke the well-dressed camel’s back. After 83 years of trading and now with debts north of £25 million, a return to the high street is difficult to imagine. A private equity firm has since bought the brand trading it online only.

AW Retail: was launched over ten years ago as a high-end luxury womenswear retailer. To survive in such a competitive industry, AWR was used to punching above its weight in attracting astute wealthy customers. When deprived of its main source of revenue during the first lockdown, it began restructuring and focused on developing online retail. Unfortunately, the third lockdown jammed the brakes on with administrators being appointed in 2021. A buyer is being sought for the business. With circa. £600K of unsecured creditors the most likely outcome is creditors voluntary liquidation.

Brooks Brothers UK: established in 2005 the company acted as the UK trading arm for one of America’s oldest family clothing retailers. Success on one side of the pond is no guarantee of prosperity on the other. Not being classed as an essential retailer meant revenue was heavily affected by each local and nation lockdown. High rent in prestigious locations and a collapse in demand for workwear was a recipe for insolvency. A lack of available trading days meant they were weighed down by £1.1 million of outdated stock from the previous year. Brooks Brothers UK entered administration in 2021 just nine months after the American parent company entered Chapter 11 Bankruptcy. A buyer was found for the parent but the deal to also acquire the UK trading arm has fallen through.

Cardinal Shop Fitters: trading for over 30 years predominantly installing new shop interiors, the company was already experiencing an economic downturn pre-pandemic. With a £2.3 million loss in 2019 and growing creditor pressure, Cardinal was clouted by the first lockdown. Retailers immediately cancelled or indefinitely delayed projects. With very little work in the pipeline and insufficient funds to sustain the company, Cardinal entered administration in summer 2020. Assets are now being sold to fund creditor claims.

Edinburgh Woollen Mill: incorporated in 1946 for the purpose of dying wool yarn to order, the company progressed to retail in 1970. The traditional target demographic is older consumers and tourists. In recent years EWM made a name for itself buying up other more youthful clothing retailers in financial distress. Perhaps a victim of its own success, the national lockdowns severed vital income from the 900 or so bricks and mortar stores. Claims from unsecured creditors are in the region of £52 million. As the business is deconstructed and brands offered for sale to fund creditor claims, the circa. 24,000 staff face an uncertain future.

Closing Thought

Corporate insolvencies are nothing new, but the rate at which some of the biggest names have fallen since 2019 is in stark contrast to previous eras. Depending on your age you may well remember some of these names who have disappeared: BHS, Blockbuster, Citylink, Carillion, Comet, Mothercare, Northern Rock, Rumbelows, Saab, Toys R Us, Wonga, Woolworths. Some of those firms collapsed as a casualty of economic progress, and others because of decisions taken by those in charge. As Spanish philosopher, Jorge Santayana said ‘those who forget the past are condemned to repeat it. That certainly is as true today as it has always been!