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Drapers Investigates: UK restructuring takes toll on Irish retail

Henry street ireland

Drapers analyses why UK retailers are choosing to wind down their Irish arms, and the impact it is having on the country’s retail scene. 

The coronavirus pandemic has had a devastating impact on fashion retail. In April, UK retailers Debenhams, Cath Kidston and Laura Ashley went into administration, all blaming the “extraordinary challenges” of business under Covid-19

Controversial restructuring tactics, including company voluntary arrangements, have helped some retailers to survive by slimming down their store estates across the UK, although this has not always been enough: Oasis and Warehouse Group ceased trading entirely on 30 April, after administrators failed to find a buyer.

The travails of these UK retailers have hit Ireland’s high street hard. Instead of launching an examinership process – the equivalent of UK administration – and downsizing their Irish store portfolios, UK retailers are deciding to wind down or liquidate their businesses altogether.

Many retailers have simply been pushed over the edge 

Arnold Dillon, Retail Ireland

On 16 April, the Irish High Court appointed provisional liquidators to the Irish arm of Oasis and Warehouse Group, and on 11 May the winding-up of the business was confirmed. All 11 stores and 28 concessions were temporarily closed amid the coronavirus lockdown, and will not now reopen. 

On the same day in April, Kieran Wallace and Andrew O’Leary of accountancy firm KPMG were appointed as joint liquidators of Debenhams’ Irish business, resulting in the closure of all 11 stores. 

Ken Tyrell and Declan McDonald of PWC were appointed as provisional liquidators to Laura Ashley Ireland on 17 April. Its four Irish stores and one concession are currently at risk of closure unless the company’s new owner, Gordon Brothers, decides to purchase them.

Other retailers have also decided to withdraw their presence from the republic. Cath Kidston has closed its two stores in Dublin and Kildare, after owner Baring Private Equity Asia carried out a pre-pack administration deal in April to buy the online, franchise and wholesale divisions only. Monsoon Accessorize is considering a sale of its entire business, which could put all nine of its Irish stores at risk.

When we all reopen, we do see there being a significant of proportion of retail in Ireland not making it past Christmas

David Fitzsimons, Retail Excellence Ireland

However, UK retailers’ challenges in Ireland predate the coronavirus pandemic. In the past year all Karen Millen, Coast, House of Fraser and Jack Wills stores have closed in Ireland, after the retailers went into administration. Meanwhile, seven Arcadia Group stores have been shut since June 2019, as a result of its CVAs.

There have been 27 store closures across Ireland as a result of these UK fashion retail restructurings in the past year, and at least a further 17 are at risk of shutting down, Drapers’ analysis shows. Several industry experts have said the impact of these store closures will be “enormous”, and result in empty high streets and a large amount of job losses.

“The closure of a significant number of fashion retailers reflects the enormous pressure on vast swathes of the sector at this time,” says Arnold Dillon, director of Retail Ireland, which represents retailers in the country. “Many retailers, who were already under pressure in a very competitive market, have simply been pushed over the edge.

“The crisis has accelerated the trend towards online, and social-distancing measures over the coming months are likely to compound this. The effect on retail jobs and our high streets will be huge.”

Some fear that this is just the start, and that further UK retail store closures will have a knock-on effect on Ireland. 

More than 20,000 retail stores in the UK will close for good in 2020 as a result of the coronavirus outbreak, a March report from the Centre for Retail Research (CRR) called Coronavirus: Lost Lives, Lost Stores and Lost Jobs, suggests. 

A spokesman for one Irish retail chain tells Drapers: “What’s worrying is there will also now be more retailers, including those that are UK-owned, who will not reopen after the coronavirus crisis, which will have a negative impact over here.”

David Fitzsimons, group chief executive of Retail Excellence Ireland, a not-for-profit company that supports Irish retailers, agrees: “Before Covid-19, there were a lot of vulnerable retailers, such as Debenhams and Coast. The coronavirus has had a monumental impact in terms of business. When we all reopen, we do see there being a significant proportion of retail in Ireland not making it past Christmas.”

Small Irish retailers can open on 8 June, and others on 29 June. Shopping centres follow on 10 August. 

Examinership is a slightly different process from administration in the UK, and running them alongside each other does have its problems

Declan McDonald, PWC Ireland

Fitzsimons adds: “What is concerning is that these UK retailers have quite a significant presence over here. For instance, where a Debenhams has closed, this will have a monumental impact on specific streets [because of their locations and store size].  

“Take Zara, for instance, which had a shared entrance with Debenhams [and Oasis] on Henry Street in Dublin. This will get management teams thinking about their store adjacencies, and whether they want a presence here now. H&M, another successful retailer, will probably be thinking the same thing.” 

Henry street ireland

Henry Street, Dublin

Luke Charleton, head of transaction advisory services at EY Ireland, says it is disappointing that UK retailers are not taking the same approach in Ireland as they are in the UK: “It is surprising, given that the markets are behaving in the same way and consumers are behaving in the same way. There is a view that if the UK business can come out of an administration process with a different shop footprint, why can’t the same apply in Ireland?

“In Ireland, we have the examinership process, which is a turnaround and rescue process that is designed to save companies that have a good business, but could become insolvent. It is designed to help them reshape, get new investment and come out the other side as a viable business.

“So I would think that option was there for these retailers. But obviously the directors decided they couldn’t rescue the business, and therefore chose liquidation or to close stores in an Irish-only context.”

What is examinership? 

There is no such thing as administration under Irish company law. The equivalent process is examinership – which is similar to chapter 11 bankruptcy protection in the US.

It is a process used by a company in financial difficulty to reach a binding agreement with its creditors to pay back all, or part, of its debts over an agreed timeline.

Companies consider it if they are insolvent with large debts, needing to restructure, experiencing trading difficulties, under pressure from their creditors, or wanting to avoid liquidation.

PWC Ireland partner McDonald, administrator to Laura Ashley, says some UK retailers will have opted to wind down their Irish businesses because it was the “final straw”: “A lot of the companies mentioned in Drapers’ analysis have gone through [an examinership] process previously, including Monsoon (2013), Debenhams (2016) and Warehouse (2014). 

“A lot of those processes would have been off the back of the last financial crisis. Many availed of examinership to renegotiate – and in some instances exit – onerous leases. It is not unlike CVAs in the UK. Many of them would have thought about running [another] examinership, but in the current crisis that may have proven difficult.”

He explains that it can be challenging for UK businesses to run two separate types of restructuring processes at the same time: “[Examinership] is a slightly different process from administration in the UK, and running them alongside each other, while not impossible, does have its problems in terms of timing and legal nuances. Many Irish subsidiaries of UK retailers are effectively run as a branch of the UK business but have a separate legal entity dependent on the UK parent for product and central services.

“There is also a slight nuance in terms of running a rescue process in Ireland, compared with the UK. For an Irish business to enter into examinership there has to be a reasonable prospect of long-term viability, the undertaking or entity has to survive and the process is limited to 100 days. [This is not a requirement in the UK administration process.]

Those choosing to liquidate are doing so because they see no profitable future of any description for their stores

Neil Hughes, Baker Tilly

“So, why are they liquidating their Irish arms, as opposed to examinership? Viability needs to be addressed in an examinership, and I suspect that is probably a difficult question to answer in the crisis.”

Several industry experts told Drapers the Irish businesses will have been wound down because their stores are unprofitable.

The director of one UK restructuring firm says: “Most of the fashion businesses mentioned in this list have been going through a restructuring (such as Debenhams and Oasis), and are all UK businesses with a small Irish company set up to deal with the Irish leases/employees.

Drapers' analysis of high street store closures and at risk closures in the Republic of Ireland

Drapers’ analysis of high street store closures and at risk closures in the Republic of Ireland

“So, in these cases, the Irish liquidation is just an extension of the UK process and they have chosen liquidation for the Irish company as they need to close the Irish stores, which are potentially not profitable.”

Neil Hughes, managing partner at advisory firm Baker Tilly, agrees: “Those choosing to liquidate are doing so because they see no profitable future of any description for their stores.”

The former CEO of one UK womenswear retailer, which has an Irish presence, says: “Ireland accounts for 5%-10% of total sales, excluding international.” Industry sources say this is a typical percentage. “This is mostly through concessions in [department store] Brown Thomas and [off-price] outlets in Dundrum and Kildare. The standalone stores don’t make money, because of ridiculously high rents.”

Drapers’ analysis found that Dublin had the highest number of UK-owned store closures (see map), followed by Cork, Galway, and Kildare, respectively. 

Retail rents in prime locations in Dublin are six times higher than the national average, a survey by the Society of Chartered Surveyors Ireland found.

The director of one Irish retail chain says: “If these bigger businesses are closing in Dublin, it’s down to overheads, business rates, rents and service charges.”

Retail Excellence Ireland’s Fitzsimons agrees: “Irish retail is a very tough market overall, but most store closures will be occurring in Dublin because rents are high, versus the opportunity to trade – that is, €/sq ft versus footfall. Now, every high street, retail park, airport is going to be adversely and significantly affected by the coronavirus, not just Dublin.”

He has called for recovery measures to help the Irish high street survive (box, below).

Five proposed recovery measures for Irish retail

Cancellation of local authority business rates for 12 months

Extend existing three-month government rent grant of 60% of the rent payable during coronavirus store closures to five months

Exceptional liquidity measures to shore up cashflow and keep businesses alive

Consumer spending initiatives, once the economy reopens

Re-employment measures to ensure as many retail colleagues as possible are rehired

Hughes agrees that rent reductions are needed: “The biggest issue is going to be a reduction in high street rents to levels that take into account the new trading conditions post Covid-19. If landlords take a realistic approach, retailers will survive.”  

Dillon says: “Without additional government support, many more businesses that are closed temporarily will not reopen, and many thousands of retail jobs will be lost. The focus must be on protecting viable but vulnerable retailers.

“There is now an urgent need for central government funding for local authorities so they can put in place a six-month commercial rates exemption for affected retailers, along with a further facility for a six-month payment deferral.

“When it comes to rents, a great many retailers will simply not be in a financial position to pay over the coming months. An arbitration process to manage disputes over commercial leases is required. This should include a facility for state burden-sharing and short-term eviction protection.”

It is evident just how much UK restructurings weigh on the Irish retail scene. To prevent widespread high street closures, landlords will need to negotiate with retailers to help their stores become more viable.

How UK restructuring has affected retail in Ireland

10 August 2018 – House of Fraser

Sports Direct acquired House of Fraser for £90m through a pre-pack administration. Frasers Group now currently operates 51 UK House of Fraser stores, down from the 59 it acquired when it bought the department store out of administration in 2018. 

House of fraser dundrum

There are currently no House of Fraser stores left in Ireland, after its store in Dundrum closed in February 2020.

12 April 2019 – LK Bennett

Rebecca Feng, who ran LK Bennett’s Chinese franchises bought the UK, Ireland and wholesale business of the premium womenswear retailer for £9.8m under the company Byland UK. LK Bennett Ireland has since entered a company voluntary liquidation (CVL) process earlier this year, its latest administrators’ report shows.

There are currently three Republic of Ireland stores in Dundrum, Kildare (Outlet) and Dublin, and six concessions, including those within the Brown Thomas store on Grafton Street in Dublin, as well as one in Arnotts.

It is not known whether stores are planned for closure as part of the CVL.

Kildare village outlet

Kildare Village

12 June 2019 – Arcadia Group

Arcadia Group launched seven company voluntary arrangements (CVAs) across its companies, which resulted in the closure of 23 out of its total 566 UK and Irish trading locations.

Closed: Dublin Henry Street (Evans & Wallis), Dublin St Stephen’s Green (Topshop and Miss Selfridge), Dublin Jervis (Topshop and Topman), Dublin Liffey Valley (Wallis), Cork (Dorothy Perkins and Evans), Galway (Miss Selfridge)

topshop spring 20 2

Topshop spring 20

5 August 2019 – Jack Wills

Will Wright and Chris Pole from restructuring firm KPMG were appointed as joint administrators of Jack Wills and immediately sold the brand and UK trading assets to Sports Direct International. All 100 Jack Wills stores in the UK and Ireland, as well as its distribution centre, were transferred to Sports Direct (now Frasers Group).

There are currently no Jack Wills stores left in Ireland, after its stores in Dublin and Kildare closed in March 2020.

Closed: Dublin, Kildare

7 August 2019 – Karen Millen and Coast: 

Ken Fennell and James Anderson of Deloitte Ireland were appointed as joint provisional liquidators of Karen Millen Ireland Ltd (Karen Millen and Coast), a day after the UK parent company fell into administration and was later bought by Boohoo Group (resulting in the closure of all 32 UK stores and 117 concessions).

The two stores it operated, one at Dundrum and the other at Kildare, and 16 concession stores, which traded under the Coast and Karen Millen brand names in Dublin, Cork, Limerick and Galway, were closed at the end of 2019. 

Closed: Dundrum, Kildare

31 March 2020 – Monsoon Accessorize 

Monsoon Accessorize revealed that it is considering a sale of the business as a result of the impact of the Covid-19 coronavirus outbreak.

Monsoon Accessorize (dual) stores that are at risk: Cork (Mahon Point), Cork (Patrick St), Drogheda, Dublin (Dundrum Shopping Centre), Dublin (Grafton St), Galway, Kilkenney, Limerick, Sligo

9 April 2020 – Debenhams

Debenhams appointed advisory firm FRP Advisory as administrators, in order to protect the UK business from liquidation.

On 16 April Kieran Wallace and Andrew O’Leary of accountancy firm KPMG were appointed as joint provisional liquidators of the Irish business.

Debenhams limerick

Debenhams Limerick

All 11 Debenhams stores in Ireland will not reopen after they were temporarily closed amid the Covid-19 coronavirus crisis.

Closed: Blackrock (Dublin), Blanchardstown, Cork (Mahon Point), Cork (St. Patrick’s Street), Dublin (Henry Street), Galway, Limerick, Newbridge, Tallaght, Tralee, and Waterford.

21 April 2020 – Cath Kidston

Cath Kidston’s owner Baring Private Equity Asia bought the online, franchise and wholesale business in a pre-pack administration deal in April 2020, resulting in the closure of its 60 UK and Ireland stores.

Closed: Dublin, Kildare

22 April 2020 – Laura Ashley

Global advisory, restructuring and investment firm Gordon Brothers rescued Laura Ashley from administration. The new owner acquired the global brand, its archives and related intellectual property from administration.

Before this, on 17 April, Ken Tyrell and Declan McDonald of PWC were appointed as provisional liquidators to Laura Ashley Ireland. The High Court said Gordon Brothers has engaged in a process of due diligence, with a view to streamlining the business in Ireland and the UK. That process may result in some of the Irish and UK stores being retained.

There are currently four Ireland stores at risk: Dublin, Cork, Galway, Athlone 

30 April 2020 – Oasis and Warehouse Group 

Joint administrators Rob Harding and Richard Hawes of accountancy firm Deloitte said they had been unable to rescue any part of the business, blaming the “extraordinary challenges” of the Covid-19 coronavirus pandemic. The group closed its website and all stores and concessions after failing to find a buyer.

Warehouse spring 20 (4)

Warehouse

The Irish High Court appointed provisional liquidators to the Irish arm, and on 11 May the winding-up of the business was confirmed. All 11 Oasis and Warehouse stores in Ireland will not reopen after they were temporarily closed amid the Covid-19 coronavirus crisis. The two stores in Northern Ireland will also be liquidated and will not reopen after the lockdown. 

Oasis stores closed (10): Dublin St Stephens Green, Cork, Blanchardstown, Dublin Liffey Valley, Cork Mahon Point, Dublin Dundrum, Sligo, Drogheda, Newbridge, Athlone

Warehouse stores closed (1): Galway 

 

 

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