Assignment: Debenhams prepares to file for bankruptcy
Debenhams is preparing to call in administrators after the struggling department store was forced to close all its outlets under the coronavirus lockdown.
The company, which has 22,000 staff and was rescued by its lenders after collapsing into administration only a year ago, is understood to be considering filing a formal notice of intention to appoint administrators next week. The legal process provides protection from creditors for 10 working days while a company tries to secure a rescue deal.
Potential administrators lined up this time include KPMG, which handled the Debenhams restructure last May.
A Debenhams spokesman said: "Like all retailers, we are making contingency plans reflecting the extraordinary current circumstances. Our owners and lenders remain highly supportive and whatever actions we may take will be with a view to protecting the business during the current situation."
Debenhams was taken over last year by a group of its financial backers, including the US hedge funds Silver Point and GoldenTree, after falling into administration. It then used an insolvency process known as a company voluntary arrangement (CVA) to cull unprofitable sites and cut rents.
The group has closed 22 stores, 19 of which shut in January, resulting in more than 700 job losses. A further 28 of its remaining 141 stores had been lined up for permanent closure next year.
Since the coronavirus lockdown Debenhams, which has more than £600m of debt, has written to landlords asking for a five-month rent holiday and reportedly asked suppliers for a 31-day delay to some payments as it seeks to conserve cash. One insider told Sky News, which first reported the retailer's plan, that there was a realistic prospect that Debenhams' clothing suppliers would take legal action against the company for deferring invoice payments during the lockdown.
Any collapse into administration could pave the way for Mike Ashley's Frasers Group, formerly known as Sports Direct, to revive its interest in Debenhams.
The department store's CVA plan was subject to a legal challenge amid pressure from Ashley, whose retail group's investment of £150m was wiped out when Debenhams went into administration. He was keen to combine the department store firm with his House of Fraser chain.
Debenhams is one of many retailers in financial difficulties because of the coronavirus shutdown. Richard Hyman, an independent retail analyst, said it was likely to be the first of many fashion chains in trouble because of an oversupply in the market, as well as the knock to sales from Covid-19.
"There will definitely be more [in difficulty] and quite a lot more," Hyman said. "But the shakeout may be delayed and you can't really liquidate assets in this environment."
Even before the pandemic, British department stores had been in difficulty, with shoppers shifting to buying online or spending on experiences such as holidays, digital services and takeaways, and firms struggling with rising costs, including business rates and staff pay.
The department chain Beales closed its 23 stores after falling into administration in January, while House of Fraser had shut at least seven of its 59 branches before the government shutdown was announced.
John Lewis has also said it is considering permanently closing outlets after profits at its department stores plunged by 65% to £40m.
Answer all the questions.
o Find out in which category Debenhams falls into. Explain in details.
o After reading the article what do you think are the main reasons that lead to Debenhams bankruptcy.
o Uk has witnessed difficulty in dealing with their customers even before the pandemic. Explain how.
o From your point of view, what do you thing were the reasons of the change in UK consumer behaviour.
o List down with example what should retailers which were affected by the pandemic should do to overcome the loose and to maintain trading.
o Talk about 3 retailers around your place that were affected and how did they react to this pandemic.
o Discus the importance and the role of technology for retailers during COVID-19.
o Which type of store layout department stores should use. and why?
o Write up all the possible solutions that might help Debenhams to overcome failure.
o "The manufacturer uses a push strategy, pull strategy or both in the different situation". What is the suitable promotional strategy retailers should apply during this tough time? And why?
Format your assignment according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.