What went wrong with Wilko’s and the latest on the proposed takeovers?

Wilkos once considered one of the bastions of the Britains high streets sadly fell into administration this month, well known for its bargain homeware prices and prominent locations has suffered the same fate reminiscent of the grand demise of fellow pick and mix seller Woolworths.

Where did the business go wrong?

While most similar retailers have moved to bigger locations out of town, such as home bargains, B&Ms and pound stretcher over recent years, wilkos remained steady with high priced central locations bucking the trend, however this has came with some big increases in cost following the covid-19 pandemic, and the years following with higher national living wages, higher rents and increased bills. These increased costs have led to less competitive pricing and coupled with the emptiness of British high streets that have suffered reduced footfall.

These challenges have shown creeks in the business over the last few years with 15 stores already closing last year and between 2020 and 2021 the reduction of 1600 jobs. These cuts were clearly not enough and the sustainability of the business has been in question for sometime with the business borrowing over £40 million pounds in January from Hilco a firm notoriously well known for lending money to failing businesses.

Visiting wilko’s over the past couple of years has been a bit depressing with gaps on the shelves across there vast retail spaces, no product changes and what is quite clearly a lot of slow moving product lines, which is disappointing and doesn’t give you much will to return as customer.

Many analysts would probably add that continued move to online has also added to the failings of the business however if you compare the business to the booming B&M’s its clear that there is a space in the home retail market but you have to understand the customer to keep a business successful, and quite simply put Wilkos did not react to its customers changing buying patterns well. Lets face it what’s actually changed in a wilkos store in the last 10 years? nothing exciting is an understatement.

The fact remains that wilkos could simply not offered to continue to pay its rent and suppliers leading to an untenable situation where they had to face the worst for there shareholders and employees as the company feel into administration .

How can the business be saved and what about the employees?

Any company looking at taking in the challenge will need to be ready to cut loss leading stores and inevitably look at ways to reduce staffing to make the business tenable. Although the the bleakness of the stores in recent years does not leave much for the investors pallet the potential to cut costs and take advantage of the companies over one billion turnover is of course the first step to tantalise investors with a flurry of offers expected with the likes of poundland, the range and B&M’s all reported to be interested in a slice of the pie.

While its not a simple matter, to survive in some way shape or form, the business will need to slash its head office costs, revitalise its sad product range and cut its costs in terms margins on the products it sells.

Personally I would love to see the business look at customers and see they do not want a super bland boring experience and they want something new. The lack of innovation will cause the business to stagnate, an experienced retailer taking the business on will certainly put them on the right track to bring customers back.

Thankfully there is interest and at least some jobs will be saved if takeover or even a partial takeover occurs. Employees will be part of any takeover and they will be transferred to the new business. Most job losses occour after the administrators make a decison.

What will happen the business is not saved?

In the unlikely even the business is not saved by a buyer, the business will be sold off in parts and there will likely be a mega fire sale across the remaining store where goods and assets will be sold for low price as quick as possible to get some return for the businesses debtors and potentially pay any remaining wages.

In the event the business cannot pay redundancies and wages the responsibility will fall to the British tax payer with the redundancy payment office footing the bill, similarly any pensions will be protected as by the Pension Protection fund.

A wave of support has come in from other retailers including Morrisons, McColls, Asda and Tesco who have been struggling to attract staff, with many posts on linkedin sharing condolence and invitations to apply. I would advise not take a new job within the administration period if you have a long length of employment (over 2 years) as you could lose out on any redundancy payments.

Although my criticism of the business model has been a bit scathing, as someone who has been made redundant this year I share a deep sadness with all of the wilkos employees who face an uncertain future and I wish everyone all the best. – Money Lad