Reading time: 5 minutes

On 10 August 2023 the high-street discount retailer Wilko (formally Wilkinsons) went into administration, leaving 400 shops and over 12,000 jobs at risk. PwC has been appointed administrator and is continuing its search for a buyer.

Founded by James Kemsey Wilkinson in 1930, Wilko has been a mainstay on British high streets since the first store opened in Leicester in 1930 as a single hardware store. It remained in the ownership of the Wilkinson family until it entered administration.

Wilko has become a major victim of Britain’s tougher economy, which has seen 14 consecutive interest rate rises since December 2021.

What’s happened?

Wilko has faced intense competition from other discount retailers including Poundland, B&M, The Range and Home Bargains for years. Not only that, but the high street has been beset by supply chain problems, inflation, rising rent costs, the covid-19 pandemic and the current cost of living crisis.

Wilko’s decline appears to be a combination of:

• supply-chain problems;
• mounting debts; and
• not enough liquidity of cash to get supplies back into the stores.

Reportedly, Wilko stores have had empty shelves for months and haven’t been able to pay suppliers for further stock, which has meant declining sales and consumers turning to rival shops instead.

What happens next?

As tends to be the case in administration matters such as this, the company and its administrators will want to stress that it’s ‘business as usual’ for consumers.

Stores will remain open for now, with many goods being sold at reduced prices while PwC attempts to play ‘damage limitation’ and either sell or save as much of the company as possible to avoid mass store closures and mass redundancies of staff roles. PwC reports that it hopes between 200 and 300 stores can be saved.

PwC has confirmed that Wilko will continue to trade out of all stores without any immediate redundancies. However, if a buyer for some or all of the company isn’t found, some store closures and redundancies may be inevitable. There’ve been several rescue bids for the company, which suggests that it could be saved from a complete and total collapse following its administration.

It’s reported that the Canadian entrepreneur Doug Putnam, CEO of Sunrise Records and owner of entertainment retailer HMV, has bid for the Wilko name and a large chunk of the business. However, it’s not yet clear whether this bid will be enough to prevent Wilko from being broken up and sold for parts.

The insolvency process

When a company enters administration, it gets a little breathing room to allow rescue bids to be made or assets to be sold. During this process, an administrator is appointed to manage the company’s affairs, business and property for the benefit of its creditors.

Accountants, solicitors and barristers can act as administrators, but they must be licensed and qualified insolvency practitioners.

The objective of the process is to:

• rescue the company so it can continue trading;
• get a better result for creditors than if the company dissolved; or
• sell property and assets and distribute proceeds to secured or preferential creditors.

If the insolvency practitioners believe the company can’t be rescued, the company can either be sold as a whole (shares, IP, assets and everything) or broken up and sold for parts. This means some bidders might bid for the IP, others might bid for the assets or stock, others might bid for the land, and so on. If the company’s assets are to be sold, the order of entitlement to assets of the company tends to be:

1. creditors with fixed charges (banks and lenders who hold title over a business asset);
2. the insolvency practitioner (to recover their costs);
3. preferential creditors (employees owed wages and holiday pay);
4. creditors with floating charges (over, for example, stock, raw materials, works-in-progress, or fixtures and fittings);
5. interest on debts; and
6. shareholders.

How is this going to impact the future of the high street?

The high street has been under threat for a long time due to a number of factors:

• the covid-19 pandemic and nationwide lockdowns;
• rising costs (rent, utilities, town/city centre parking);
• growth of online shopping; and
• growth of out-of-town retail parks – for example, McArthurGlen retail outlet centres.

On the last point, out-of-town retail parks are rising in popularity, threatening the high street, because:

• land outside of town/city centres can be bought for less than in town/city centres;
• the parks and outlet centres can provide greater protection from the elements than centres; and
• the landowner may offer free parking, which retailers in town centres can’t provide due to local council decisions.

The rapid decline in footfall in high streets has led to the end for a number of high street mainstays, including:

• McColl’s;
• Debenhams;
• Paperchase;
• the Arcadia Group; (which owns the brands Topshop, Burton and Dorothy Perkins) and
• Joules.

Even other mainstays like Boots, New Look and M&S are considering their options. Without footfall on high streets, retailers won’t see in-person sales. It’s much easier to buy most things from home now, so consumers are choosing comfort and convenience over going into town. Retail as a concept has had to evolve, and retailers have had to keep up to survive and remain relevant.

I believe each town and city has its own unique character. Imbuing this character into high streets could give consumers a reason to return and bring back footfall, which would give the high street a greater chance of survival. So, local councils and retailers must think about what compelling experiences consumers can get on the high street that they can’t get online and tap into that to attract them out of their homes and off their phones.