Wilko, the budget retailer, has issued a concerning statement, indicating that it is teetering on the verge of collapse. This distressing situation puts over 12,000 jobs in jeopardy. The high street is grappling with mounting expenses and lackluster consumer demand, exacerbating the challenges faced by the company.
The household and garden products retailer, boasting approximately 400 stores, has disclosed its action of filing a notice of intention to appoint administrators at the high court on Thursday. The advisory firm PricewaterhouseCoopers (PwC) has been enlisted to handle the situation.
In recent months, PricewaterhouseCoopers (PwC) has been collaborating with Wilko to actively seek a potential buyer, aiming to secure the necessary additional funds by the end of this month to sustain ongoing operations.
Should Wilko succumb to administration, it would become the most significant retailer to do so since the convenience store chain McColl’s, which experienced a similar situation just over a year ago. Fortunately, McColl’s was successfully rescued by the supermarket chain Morrisons.
Established in 1930 with the opening of its first store in Leicester by JK Wilkinson, the budget retailer has played a crucial role in filling numerous high street gaps left by the collapse of Woolworths in late 2008. Despite its efforts, the tough economic climate has posed significant challenges for the company. To address its financial difficulties, Wilko borrowed £40 million from the restructuring specialist Hilco last year. The company took measures to tackle the situation, including job cuts, restructuring its leadership team, and selling off a distribution centre after experiencing losses and facing a cash crunch.
The retailer witnessed a decline in sales as it grappled with payment issues to suppliers, resulting in empty spaces on shelves. Moreover, the withdrawal of trade cover by at least one credit insurer prompted certain suppliers to temporarily halt deliveries.
Notwithstanding its challenges, the owners of Wilko, headed by the Wilkinson family, received £3 million in dividends during the 12 months leading up to February 2022. However, in the accounts filed at Companies House last year, the company’s auditors cautioned that it lacked adequate committed financing to endure a “severe but plausible downturn in trading activity.”
Hilco, the owner of Homebase and former owner of HMV, is poised to be a prominent candidate to assume control of Wilko in the event of administration, given its status as one of the largest creditors.
Issuing a notice of intention provides a business with a 10-day safeguard against creditors, allowing it the necessary time to stabilize its financial situation. It is important to note that such a notice does not automatically entail the appointment of administrators.
Mark Jackson, the Chief Executive of Wilko, said, “While we can confirm we’ve had a significant level of interest, including indicative offers that we believe would meet all our financial criteria to recapitalise the business, at present, we don’t today have an offer that provides the necessary liquidity in the time we have available, given the mounting cash pressures we’re faced with.
“Unfortunately, with this in mind, today we’re having to take the difficult decision to file a [notice of intention to appoint administrators].”
According to Jackson, the company plans to persist in engaging with interested parties and endeavors to secure its future as swiftly 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.
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 number one priority going forward.”
