What other options did they have?
Fast fashion retailer Quiz have chosen option D and placed its subsidiary company, Kast Retail Limited, that looks after its physical UK stores into administration.
Quiz said it is proposing to then acquire the business and certain assets from Kast (acting through its administrators) for a cash consideration of £1.3 million.
The assets would then be transferred to another subsidiary business, Zandra Retail Limited, who would then take on the remaining stock, premises and staff under an arrangement called TUPE.
Sadly, 93 positions will be made redundant as a result with Quiz blaming the enforced lockdown closure for the move.
Quiz said this would allow it to operate an economically viable store portfolio alongside its online, UK concession and international channels – which won’t be affected by the administration.
Chief executive Tarak Ramzan said: “It is with deep sadness and regret for some of our colleagues and partners that we had to take this decision to restructure the group’s operations.
“Physical retail in the UK was facing a major structural challenge prior to the outbreak of Covid-19 with the economics of operating stores on traditional leases becoming increasingly difficult.
“We continue to believe that stores, with appropriate property costs and flexible lease terms, can continue to be a relevant pillar in our omnichannel model and we will be seeking to reopen stores where we believe it is prudent and economic to do so.
“We believe that with an appropriately structured store estate in combination with our capital light concession model, international channel and online focus Quiz will be better positioned for all its stakeholders over the long term.”
They aren’t alone.
Were there any other options?
Retailers Monsoon and Accessorize, both owned by the same company, also both went into administration briefly before being bought out by their existing owners as new legal entities.
Monsoon founder and owner Peter Simon said he planned to save as many of their 162 stores and the 2,300 employees working there as possible.
He said: “Both Monsoon and Accessorize were trading well before the coronavirus pandemic, but the business simply could not withstand the financial impact of having to close all its UK, franchise and joint venture stores for almost three months.
“This deal secures the future of both Monsoon and Accessorize and means we can continue to serve our customers online without a pause. In addition, we will now try to save as many of our stores as possible, depending on the outcome of various discussions with landlords. I would like to thank landlords for the helpfulness and enormous forbearance they have shown so far, which has enabled us to get to this point.”
Although since this statement was made they have announced that 35 stores would not be reopening and that 545 positions are being made redundant as a result.
“If it were done when ’tis done, then ’twere well It were done quickly” Macbeth
A pre-pack administration is one of those hot terms that appears in a lot of articles about businesses in administration but few people understand what it entails or why it is used as an approach.
It’s a simple concept – it is an insolvency process but one where the sale of a company’s business, assets, name and other items are negotiated with a potential purchaser or decided before an administrator is appointed.
The sale then goes through either immediately or just after their appointment.
It’s often used for the sale of companies that would have little to no other interested parties so a pre-pack is a suitable alternative to liquidation for them and creditors who stand to make a better return than if the company is broken up and sold off.
It provides continuity with existing suppliers and customers and if done properly will be seamless. Existing staff will be transferred across to the new company under TUPE with no reduction in conditions.
For all the winners a pre-pack administration brings, inevitably there will be people who feel that they’ve lost out.
Positions can be made redundant, loss-making or economically unviable stores can be closed and creditors who are unhappy with the management and direction of the company have little say on the process and opportunity to affect change that a traditional administration would bring.
A pre-pack administration, Company Voluntary Arrangement (CVA) or other insolvency tool might ultimately benefit your business but you need to speak to a friendly expert before you make any important decisions.
Just because a pre-pack administration concludes quickly doesn’t mean that it has been planned meticulously with an insolvency practitioner advising the company at every stage of the process including what the potential pitfalls could be as well as the prizes.
If you think that your company could be successfully rebooted then get in touch.
Once we understand your circumstances and current situation, we’ll be better placed to give you advice on what you could do – including strategies you might not have already considered.
That’s where the expert in our name comes in.