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Editor's Comment: Suppliers need protection for industry to survive

Keely Stocker

There have been several times of late that I have urged the government to step in and support this industry, and unfortunately this week is no exception.

Following Mike Ashley’s acquisition of House of Fraser through a pre-pack administration on Friday, the Drapers team has been inundated with calls from suppliers who are outraged and heartbroken at the repercussions of the deal, resulting in them not being paid for June and July. 

Many are now in a quandary about their future relationship with 169-year-old chain, and questioning whether it is better to cut their losses and walk away or fight to be a part of its future under Ashley’s reign. The sad fact is that the decision probably lies with Ashley, as he holds the power to pay the suppliers he would like to continue to work with but is under no legal obligation to do so with those he does not. 

Ashley may have paid £90m for HoF but, as it comes debt free, it is a steal – Chinese conglomerate Sanpower bought 89% of its shares for £480m just four years ago. The business had lost its long-term vision and was vastly under invested, resulting in Ashley being able to pick it up for a fraction of the price. The industry will be hoping that Ashley pays suppliers what they were owed before HoF went into administration, but he is not required to do so by law. 

Ashley has urged HoF suppliers to continue with “business as usual”, and in a letter to creditors seen by Drapers, Sports Direct said it was “committed to creating stability as soon as possible”. 

However, HoF administrator EY has said the amounts owed to unsecured creditors – which include suppliers, landlords and the retailer’s 10,000 pension holders – “will not be paid”. 

This is why the government must step in to stop these practices that have – and will continue to have – such catastrophic effects on the industry. 

While suppliers strive to find a balance of businesses to work with to limit the risk of exposure, many are constrained by exclusivity contracts, so when a business goes under, their business and staff are immediately at risk.  

As the industry becomes tougher and more competitive, suppliers are constantly being squeezed. There must be a level of accountability to ensure they are paid when the worst happens. 

The law must change to protect suppliers and to protect this industry. Surely it is time for the government to step in and show its support by changing these outdated practices. Once again, we urge it to do so to safeguard the future of the fashion industry.

Readers' comments (8)

  • Thank you Keely for being our voice!
    We have spoken to our regular contact at HOF who is not able to provide any information at the moment despite EY asking us to contact our usual contacts
    Being a small company this will simply put us out of business if we are not paid.
    I appreciate that there are rules & procedures to be followed once a company is put into administration but given the company was bought out of administration only 30 minutes after it went in this is an unusual situation, and one would hope that the right thing is done and small suppliers such as us are paid for the stock that has been delivered almost 90 days ago! I hope the government will actually do something quickly about this.

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  • My sympathies go out to all that are owed money and the law is an complete ass, but it was always going to happen. Everyone I've spoke to over the last few years that deal with HOF, I have warned them not to supply a penny more than they are covered by credit insurance for when the worst happens and/or look to phasing them out before things hit the fan. I think too many people believed what they said.

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  • In response to the comment above we had phased them out ...our last payments were due by the 20th August. This happened 2 weeks too early for us and unfortunately will have disastrous consequences on our business. Come on MAY do something for once about this very unfair situation!

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  • House of Fraser, Sports direct, Debenhams.. Companies such as these only see ' ££' signs and do not care about their suppliers ( or are they calling them 'Partners' when it suits). Suppliers will always be an oversight, unless they can put egos aside and work together for more protection. This maybe the only way the government will take any notice of their plight.

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  • Whilst I have enormous sympathy with all that I owed money , I’m unsure of what the government can do. Surely as soon as insurers withdraw cover then this is a clear sign that they do not support the business. It is already a criminal offence to trade whilst insolvent. This business was only continuing to trade with the promised support of Sunpower and as soon as that disappeared then so did any financial guarantees. I’m would be interested to hear of any proposed legislation that could have avoided this sorry state of affairs. Everyone is asking the government to step in however capitalism works on the basis that companies can prosper as well as fail.

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  • It's easy for the government to step in and tighten up the rules on pre packs and CVAs. But they won't as many could have vested interests in companies-not specific to this one-but just in general. Retail is a huge employer but the government don't seem to care about it.

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  • This is an interesting conversation, however we must be careful what we wish for. I agree that cva’s in particular must be reviewed as they are being used more as a way as negotiating as opposed to helping a business survive. Regarding the whole administration process this is pretty ugly whatever happens. We cannot legislate against poor decisions, feel we should be criticising HOF first, know Mike Ashley is a convenient bad boy but he pays his bills. Suspect tightening of the laws would result in HOF going a year or so back and no buyers would go anywhere near it. It that what we really want? Let’s hear some proposals, it’s easy to say ‘help us’ but what do we as an industry really want??

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  • This was an obvious outcome since the start of this year. Debenhams are less a few years in the same boat. Even JL is at heaps of risk. The department store model is outdated. Harrods and Selfridges are tourist flocking exceptions and top top end. Yet I fear the same suppliers will make identical mistakes and not read the market trend. In this respect, They have to take some blame.

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