Wilko's goes into Administration

[david1212]

Went into Wilkinsons yesterday; despite posters in the windows advertising an administration sale I couldn’t see any reductions; all prices looked normal.....

Yesterday I wandered into my local Wilko.

There were the big notices in the window. Some items were reduced 20% e.g. cushions & bedding, kitchen electricals. Friday I had bought a kettle elsewhere. Wilko shelf labels stated 2year guarantee but of course unlikely to be honoured even if the store is still trading because different owners. Even now so long as working out-of-the-box given sold in an administration sale I'm uncertain of the guarantee terms if a failure after say 4 weeks.

As presumably not now expecting stock of items not available recently they had spread out existing stock to reduce the bare shelf spaces.

 

[MasterSpenny]

Most stores closing next week…

Most Wilko stores to close next week as union warns of ‘significant job losses’ — Evening Standard

The GMB Union, which represents more than 3,000 Wilko staff, said a rescue purchase out of administration “fell through”

apple.news

Most Wilko stores will close in the next seven days, the union representing around a third of its staff has revealed, after it said an attempt to rescue the beloved high-street retailer out of administration “fell through”.


GMB Union, which represents more than 3,000 of Wilko’s nearly 12,500 employees, said it was told that “there is no longer any prospect that the majority of the business will be saved”.


“This means redundancies for staff in store and at call centres will begin during the coming week,” it said. “Some stores may be bought, either individually or as part of larger packages, but significant job losses are now expected.”


Adminsitrators at PwC have been trying to sell any Wilko, on the whole or in parts, in order to realise any remaining value in the business. A purchase of the entire business was seen as unlikely, as Wilko’s previous management had already tried to sell the company as a whole. But it was hoped that a buyer could still aim to keep a large number of Wilko shops open.


It had previously been expected that a deal would come this week, and the Standard understands that there were multiple bids on the table, though it is not known how many shops - if any - those bidders had sought to buy.

 

[Citybreak1]

Another Woolworths situation almost identical. Rivals snap up a few shops.

 

[david1212]

While from the link below

administrators admitted ‘redundancies and store closures in the future’ were ‘likely’

also

said: ‘In the immediate term, all stores remain open, continue to trade and staff continue to be paid.

which is more logical to sell the stock plus while only a guess likely there will be a lease termination period on the stores even if the doors are shut in at the end of the month.

Longer term unless clear management issues if the current owners can not run the group or even the majority of stores viably another group of owners not likely to be able to either.

For my local store footfall in the shopping centre must be significantly down as Topshop group, Gap and Marks & Spencer have all closed with the units currently empty plus smaller units empty too. Back just 10 years ago there were council proposals to change the nearby surface car park to multi-story with a large retail unit underneath. Debenhams were rumoured to be interested.

Wilko administrators deny shops will close next week

However, administrators at PricewaterhouseCoopers (PwC) said claims the stricken retailer would close stores next week were 'speculation'.

metro.co.uk

 

[dangie]

I’ve used Wilko many times for my supply of screws, bolts, nuts & washers. I like that you can fill a Pick ‘n’ Mix bag with any combination for a few £’s. Went in this morning and there was plenty of nuts, washers & wing nuts but unfortunately no screws or bolts. Disappointing.

 

[SteveM70]

which is more logical to sell the stock plus while only a guess likely there will be a lease termination period on the stores even if the doors are shut in at the end of the month

Most commercial leases are payment quarterly in advance, and a lot still stick to the old "quarter days", the next of which is Michaelmas on 29 September. Some more modern leases shift this to 1 October. Either way, if Wilko are in a similar situation with their leases, they have only ongoing running costs for the next few weeks

 

[Mcr Warrior]

Why is Wilko's going out of business? Lack of cash (bank funding and/or supplier credit) presumably, but what's caused this? Operating an unprofitable business model over several years? Or have the owners loaded the company with a mountain of debt? Or something else?

 

[Citybreak1]

Seemingly they get more by putting store into liquidation as media days HMV owner wants to buy them but the administrators want to make a quick buck. This practice has to stop no wonder there is empty shops I wonder how many stores could be be saved? I work in retail I think if a shop goes bust it’s game up. Very few seem to emerge positively from administration. HMV was unique as it sold physical media. There’s lots of discounters.

 

[SteveM70]

Why is Wilko's going out of business? Lack of cash (bank funding and/or supplier credit) presumably, but what's caused this? Operating an unprofitable business model over several years? Or have the owners loaded the company with a mountain of debt? Or something else?

A combination of things, I think.

I've had a quick look at their headline accounts for the last five years they've filed - years ending February 2018 to February 2022 - and its clear that:

1 - Their net margin in the three pre-pandemic years was 0.5%, 0.0% and 0.1% so they weren't ever healthy

2 - Turnover is down year on year, to the point that FY21/22 is 23.3% less than FY17/18 - this is consistent with increased competition as the likes of B&M have expanded

3 - They've held their gross margin remarkably well - it moves in a narrow range of 38.9% to 40.4%

4 - They've slashed their central costs by about 20% over the five years (and that's including inflationary pressures, so in real terms its more severe), but that's still not been enough to keep them profitable

All that makes for a pretty poorly business. Add into that pressures on cashflow as more suppliers want payment up front, and suddenly it goes POP!



(All in £000)

 

[Dai Corner]

Seemingly they get more by putting store into liquidation as media days HMV owner wants to buy them but the administrators want to make a quick buck. This practice has to stop no wonder there is empty shops I wonder how many stores could be be saved? I work in retail I think if a shop goes bust it’s game up. Very few seem to emerge positively from administration. HMV was unique as it sold physical media. There’s lots of discounters.

To be fair, the Administrator's job is to realise as much value as possible so the creditors get as much of the money they're owed as possible

Creditors will include staff, the taxman, owners of leased stores, warehouses and vehicles, suppliers, customers who've paid but not received their goods and banks and others who've lent the company money.

 

[Richardr]

Seemingly they get more by putting store into liquidation as media days HMV owner wants to buy them but the administrators want to make a quick buck. This practice has to stop no wonder there is empty shops I wonder how many stores could be be saved? I work in retail I think if a shop goes bust it’s game up. Very few seem to emerge positively from administration. HMV was unique as it sold physical media. There’s lots of discounters.

In addition to the last two posts, your last sentence sums up a major point here - there are lots of discounters, and not room for them all on the High Street today.

There are reports as you say of the owner of HMV wanting to buy "up to half" of the stores, and retain about a third of the staff, and similar from the owners of Poundland and B&M. The latter two companies will only want stores in towns where they do not have a presence, and again that would be less than half the existing stores. It wouldn't be a surprise if either of those two bidders are after the same stores.

Meanwhile, as Dai Corner says, the administrator is working on behalf of the creditors.

 

[skyhigh]

Seemingly they get more by putting store into liquidation as media days HMV owner wants to buy them but the administrators want to make a quick buck. This practice has to stop no wonder there is empty shops I wonder how many stores could be be saved?

The Administrators are simply employed to gain as much as possible for the creditors of the business.

Looking at the posts above Wilko has been in a poor position and under pressure for years. Are you suggesting that the Administrators should be made to sell the business as a whole (potentially for much less than the individual parts are worth) even if there are structural issues and it's likely the business won't be viable for maybe several years?

 

[Mojo]

2 - Turnover is down year on year, to the point that FY21/22 is 23.3% less than FY17/18 - this is consistent with increased competition as the likes of B&M have expanded

I suspect a bigger part of their reduction in turnover to be associated with their poor stock levels.

 

[SteveM70]

I suspect a bigger part of their reduction in turnover to be associated with their poor stock levels.

It will certainly play a part in it, as will Covid have done in the financial years 20/21 and 21/22, but if you adjust their sales number for inflation and rebase it to FY2017/18 prices, turnover has reduced year on year by 9%, then 7%, then 11%, then 6%. So there's an underlying decline in like-for-like sales that largely pre-dates the availability issues they've had in the last year or so. Indeed, the most recent accounts are the year to February 2022, so the worst of the issue with gaps post-dates that and will become clearer in the FY2022/23 accounts

As I said earlier, the fundamental problem they had is that the business was on shaky ground with the highest net margin a wafer-thin 0.5%, so a decline in sales was always likely to be catastrophic.

 

[Gemz91]

Went into Wilkos yesterday to pick up a couple of stuff. Can’t help but feel for the staff who are about to loose their jobs, when the general public are acting like vultures hoovering up all the bargains to be had on Christmas decorations and the like.

Hopefully all the staff find new jobs quite quickly. I’ve read a few shops such as Tesco have said any Wilkos staff applying are guaranteed a job interview. there’s a fairly large warehouse just outside Worksop (not sure what other ones they have around the country), hope they can find new employment too.

 

[SteveM70]

there’s a fairly large warehouse just outside Worksop (not sure what other ones they have around the country), hope they can find new employment too

That site was sold by Wilko to DHL for £48m last year as they desperately tried to drum up some working capital

8 weeks later DHL sold it to a private equity firm for £88m

And “fairly large” is a bit of an understatement - it’s 1.1 million square feet!

 

[Peter Sarf]

Crickey another example of money for old rope. Were Wilkos in too much of a rush to sell it ?.

 

[Annetts key]

If you’re in need of an injection of cash due to poor cash flow and you have no or very little credit, yes, they would not have waited to try to get the market value.

That kinda thing happens more often than you think. Especially if it’s known that you are having problems….

 

[Xenophon PCDGS]

Did I hear correctly that the last bid made contradicted the union recent statement (see posting #92 for details) on store closures and staff dismissals?

 

[Busaholic]

Did I hear correctly that the last bid made contradicted the union recent statement (see posting #92 for details) on store closures and staff dismissals?

Nobody knows how many stores or staff might or might not be saved if the bid was successful. The union you refer to certainly shouldn't be castigated for seeking to protect the jobs of their members.

 

[Xenophon PCDGS]

Nobody knows how many stores or staff might or might not be saved if the bid was successful. The union you refer to certainly shouldn't be castigated for seeking to protect the jobs of their members.

I am not castigating anyone. Posting #92 seems very clear in what the union said was about to happen in a very short time period.

 

[Snow1964]

A combination of things, I think.

I've had a quick look at their headline accounts for the last five years they've filed - years ending February 2018 to February 2022 - and its clear that:

1 - Their net margin in the three pre-pandemic years was 0.5%, 0.0% and 0.1% so they weren't ever healthy

2 - Turnover is down year on year, to the point that FY21/22 is 23.3% less than FY17/18 - this is consistent with increased competition as the likes of B&M have expanded

3 - They've held their gross margin remarkably well - it moves in a narrow range of 38.9% to 40.4%

4 - They've slashed their central costs by about 20% over the five years (and that's including inflationary pressures, so in real terms its more severe), but that's still not been enough to keep them profitable

All that makes for a pretty poorly business. Add into that pressures on cashflow as more suppliers want payment up front, and suddenly it goes POP!

View attachment 141522

(All in £000)

There are a couple more, many suppliers have worried about Wilko paying so will now only supply if prepaid. Even stock and credit insurers have been withdrawing cover. The result is some shelves have remained empty and so customers often can't get what they want, and have started going to competitors

Then there will be bank and credit card fees, because of risk of chargeback for faulty goods and internet orders not being delivered, the credit card companies have probably hugely upped deposit and retention requirements. So Wilko have cash tied up for card sales that haven't yet been settled by card companies.

Just to add to Wilko woes, Bristol store got rather wet inside during recent heavy rain (as did a Lidl, and a Sainsbury's, and others)

Shops across Bristol damaged after torrential rain

A clean-up job is under way in Bristol after water poured from the ceilings of retail stores.

www.bbc.co.uk

 

[renegademaster]

What are the finances like for Poundland, Poundstretcher, Home bargains etc?

 

[Peter Sarf]

Did I hear correctly that the last bid made contradicted the union recent statement (see posting #92 for details) on store closures and staff dismissals?

I think there have been two new bids made after the administrators had finished the decision making and the deadline had passed. The bids involve keeping most of Wilkos going. One was by the owner who turned HMV round and I think the other offer by a Private Equity firm (M2 Capital iirc). Looks like these bids must have been after the Union statement was made and so after the "deadline".

 

[SteveM70]

What are the finances like for Poundland, Poundstretcher, Home bargains etc?

Poundland are profitable but from what I’ve heard from people I know who’ve worked there, somewhat chaotic

Poundstretcher are a basket case. CVA in 2020 and problems getting worse

Home Bargains made just under £300m in the last reported year, albeit down by about £100m on the year before, but there will be Covid impacts on there

 

[Peter Sarf]

What are the finances like for Poundland, Poundstretcher, Home bargains etc?

I have been wondering this myself, and B&M.

I can only guess that no suppliers or banks have got nervous about them. I can imagine all it takes is some bad publicity (that does not have to be totally correct). But maybe these competitors (loosely) have more money behind them or are better performing in the finance and buying departments.

 

[renegademaster]

Poundland are profitable but from what I’ve heard from people I know who’ve worked there, somewhat chaotic

Poundstretcher are a basket case. CVA in 2020 and problems getting worse

Home Bargains made just under £300m in the last reported year, albeit down by about £100m on the year before, but there will be Covid impacts on there

Poundland stores either seem to some really well organised and kept (lots of the ones in the medium sized towns of the south east ) with good variety of stuff and clothes section to rival what you get in the big Tesco's and Sainsbury's, or dark and dingy with a thin selection of goods(lot of the London ones)

 

[Peter Sarf]

Poundland stores either seem to some really well organised and kept (lots of the ones in the medium sized towns of the south east ) with good variety of stuff and clothes section to rival what you get in the big Tesco's and Sainsbury's, or dark and dingy with a thin selection of goods(lot of the London ones)

Croydon has three Poundlands (something to be proud of ?). They do vary in size and what they stock. The smallest (I think) has clothes for sale in it at the back. Another feature of Poundland is that what they stock varies from month to month. There are seldom any gaps - just as long as enough very cheap stuff of some sort is arriving from China they can then keep their shelves full.

 

[renegademaster]

Croydon has three Poundlands (something to be proud of ?). They do vary in size and what they stock. The smallest (I think) has clothes for sale in it at the back. Another feature of Poundland is that what they stock varies from month to month. There are seldom any gaps - just as long as enough very cheap stuff of some sort is arriving from China they can then keep their shelves full.

The Addo one is really quite horrible. The one in the Whitgift is pretty much the same, with the added bonus of being in a dark corner of the centre long devoid of any other shops. I thought neither of these stock clothes but it might have changed recently. The one on Church street is the better one and has limited clothes but not that brilliant either.

If I was Poundland id shut down both the central ones and instead open a merged together big branch in one of the numerous larger empty retail units sitting about.

For home stuff poundstretcher or that independent one next to the McDonald's is better, for DIY just go to Wickes or Screwfix

 

[jon0844]

So much stuff sold in these types of store today are the very things people are likely to order from Wish or Temu (both horrid sites, but they're damn popular) and that must be having an impact.