(qlmbusinessnews.com Thur, 3rd Aug, 2023) London, UK —
Budget retailer Wilko has warned it is on the brink of collapse with more than 12,000 jobs at risk as the high street struggles with rising costs and lacklustre consumer demand.
The household and garden products retailer, which has about 400 stores, said it had filed a notice of intention to appoint administrators at the high court on Thursday with advisory firm PricewaterhouseCoopers (PwC) lined up.
PricewaterhouseCoopers has been working with Wilko in recent months to try to find a buyer in an attempt to secure additional cash needed by the end of this month to keep trading.
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If Wilko does collapse into administration it would be the largest retailer to do so since convenience store chain McColl’s just over a year ago – which was rescued by supermarket chain Morrisons.
The budget retailer, established in 1930 by JK Wilkinson with its first store in Leicester, has played a significant role in filling the void left by the collapse of Woolworths in late 2008 on the high street. However, navigating the challenging economic climate has been tough for Wilko. In a bid to address its financial struggles, the company borrowed £40 million from restructuring specialist Hilco last year. To further mitigate its cash flow issues after reporting a loss, the retailer underwent job cuts, leadership team reorganization, and the sale of a distribution center.
The sales slump led to empty shelves as Wilko faced difficulties in paying suppliers, leading to the withdrawal of trade cover by at least one credit insurer, and causing some suppliers to suspend deliveries temporarily.
Despite the challenges faced, the owners of Wilko, led by the Wilkinson family, saw fit to take dividends amounting to £3 million during the 12 months ending in February 2022. However, the group's auditors, as per the accounts filed at Companies House last year, cautioned that the company lacked sufficient committed financing to withstand a severe downturn in trading activity.
With Hilco, the owner of Homebase and former owner of HMV, being one of the significant creditors, it could potentially take control of Wilko if the company enters administration.
While a notice of intention can offer temporary protection from creditors for ten days to enable the business to secure its finances, it does not automatically indicate that administrators will be appointed. The situation remains uncertain, and the fate of Wilko hangs in the balance.
Mark Jackson, the CEO of Wilko, expressed that despite receiving a substantial level of interest and several indicative offers that align with the company's financial requirements for recapitalizing the business, they have yet to receive an offer that can provide the required liquidity within the limited time available. The mounting cash pressures have left them with no choice but to make a challenging decision.
Regrettably, given the circumstances, Wilko is compelled to take the step of filing a notice of intention to appoint administrators. This difficult choice has been driven by the need to address the current financial challenges and seek a viable path forward for the company. As they face these trying times, the company remains open to exploring potential solutions that can safeguard the business and its employees' interests.
The situation remains fluid, and Wilko's management and stakeholders are actively working towards finding a resolution that can secure the company's future. Throughout this process, the well-being of the employees and the business's sustainability will remain a top priority.
Jackson said the business would continue to hold discussions with interested parties and would aim to secure its future “as fast as possible”.
“We continue to believe that our robust turnaround plan, with significant re-stabilisation cost savings in progress, will deliver a profitable Wilko and maximise the significant opportunities that we know exist,” he said.
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Andy Prendergast, the national secretary for the GMB union, which represents some Wilko workers, said: “This is extremely concerning but we remain hopeful that a buyer can be found.
“Wilko’s staff deserve reassurance that their jobs are safe. We hope this is the No 1 priority going forward.”
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