Two more high-street retailers called in the administrators yesterday as the sector braced itself for tens of thousands of job losses and hundreds of store closures over the coming months.
The homewares retailer The Pier, which employs more than 400 people across 31 stores and 17 concessions, hired the accounting firm Mazars as its administrator yesterday, as it succumbed to gruesome trading in the home improvement sector. Mazars has appointed Hilco, the restructuring specialist, to operate the business while it conducts a review of its operations.
Sources also said that Envy, the 55-store menswear chain, had fallen into administration this week for the second time this year.
Speculation is meanwhile rife that other well-known names, such as the music retailer Zavvi, the clothes store chain Phase Eight and the sportswear group JJB, are heading for a financial crunch.
The grisly news follows the collapse into administration last week of Woolworths, which employs up to 30,000 staff. Last night, industry sources played down speculation that WH Smith had expressed an interest in acquiring up to 400 Woolies stores in a deal that would keep the brand on the high street.
Yesterday, Theo Paphitis, the retail entrepreneur and star of the BBC's Dragons' Den, walked away from the bidding process for the chain. Mr Paphitis said: "Following intensive discussions with Deloitte, it is with disappointment that I confirm we could not reach a deal. Unfortunately, the constituent parts of Woolworths are more valuable than the whole."
The 800-store Woolworths will hold its "biggest ever" sale today to shift huge volumes of stock, in a move that will intensify the price war on the high street. The retailer will slash prices by up to 50 per cent across its product range. Today, Woolworths Group, which has a 40 per cent stake in 2 Entertain, the joint publishing venture with the BBC, could also be put into administration.
Meanwhile, Zavvi was last night forced to deny that it was poised to appoint a retail restructuring firm. The retailer, formerly Virgin Megastores, has become embroiled in the administration of Entertainment UK (EUK), Woolworths' wholesale business, which supplies it with DVDs, CDs and video games. Since EUK went into administration last week, Zavvi has suffered serious shortages of entertainment products, and stopped selling CDs, DVDs and video games online earlier this week. A spokesman said: "We are working directly with our suppliers to get stock into our stores."
The Pier's stores will remain open while Mazars conducts its review and the administrator intends to fulfil customer orders. Rod Weston, a partner at Mazars and joint administrator, said: "The Pier has encountered difficulties due to the harsh trading conditions of the current economic climate. The household contents market has been particularly hit within the retail sector and the business has been impacted by a lack of consumer discretionary spend." Other homewares retailers, including MFI, Ilva, Rosebys and ProCook, have also fallen into administration this year. Mr Weston added: "We are seeking a buyer for the business as a going concern."
It is unclear whether John Kinnaird – the Scottish businessman who bought Envy for £1 in February after it hit the buffers in January – had done a pre-pack administration or a full-blown administration. A pre-pack involves putting a retailer into administration and then buying it back out with reduced liabilities, such as on unsold stock and store leases.
Envy and Mr Kinnaird could not be reached last night. Mr Kinnaird, who bought Faith Footwear out of administration in September, is the former boss of the shoe chain Dolcis which also hit the buffers this year.
Elsewhere, Phase Eight, the fashion retailer backed by the stricken Icelandic bank Kaupthing, which is currently controlled by the Icelandic authorities, was said to have met venture capital firms this week in an attempt to secure rescue funds. Phase Eight was unavailable for comment last night.
Yesterday, JJB Sports, the struggling sports retailer, released a statement to address the recent sharp fall in its share price. It said: "The company continues constructive discussions with its debt providers, Barclays, HBOS and Kaupthing, who remain supportive. Discussions continue in relation to JJB's Fitness Clubs and JJB's other non-core assets and businesses."
JJB, along with other struggling retailers, has suffered from its suppliers' credit insurance being scaled back. Yesterday, Lord Myners, the Financial Services Secretary to the Treasury, rejected a call for action on retailers' credit insurance difficulties, but said he will monitor developments.
* Speaking to The Independent on Friday 5 December Bill Cooper, the finance director of Phase Eight, said: “The financial position of the company is healthy.The board and investors have not sought nor sanctioned any discussions with private equity companies or venture capitalists”.Reuse content