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Jun 5, 2020
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Victoria's Secret UK in administration filing, follows 'light touch' route

Jun 5, 2020

Debenhams isn’t the only UK retailer to opt for a so-called light touch administration filing during the coronavirus crisis, with news on Friday that the UK arm of Victoria’s Secret has done the same. It has appointed Deloitte to handle the process.

Victoria's Secret

The move follows the well-publicised problems at the US operation — which is owned by L Brands — in recent periods and also a number of administration filings for other UK store chains.

The company’s stores have been closed since the lockdown started in Britain on March 23, although its webstore has continued. The online operation isn’t owned by the UK arm so will continue.

With 800 staff (most of them currently furloughed) and 25 sites, the company hasn’t announced any redundancies. Deloitte seems to be hoping for a happier outcome and said it's currently working to either “restructure the lease terms across the portfolio, and/or achieve a sale of the company’s assets to a third party”.

Joint administrator Rob Harding said: “This is yet another blow to the UK high street and a further example of the impact the Covid-19 pandemic is having on the entire retail industry. The effect of the lockdowns, combined with broader challenges facing bricks and mortar retailers, has resulted in a funding requirement for this business, resulting in today’s administration.”

The problems at the company come after a brand that was once riding high has come crashing down to earth. With its must-see annual fashion show and flagships in the most expensive shopping locations, it was a real power label in the L Brands portfolio. But in recent years, it was seen as being dated as newer labels proved more popular. L Brands agreed a deal to sell it to New York-based private-equity group Sycamore Partners earlier this year, but that was called off only this month.

That likely prompted a long, hard look at its internatioanal ops and now the firm’s finance chief Stuart Burgdoerfer has said that as part of the parent firm’s profit improvement plan, “we are addressing the operating losses in our 25 UK stores by appointing Deloitte to work with VSUK in a 'light touch’ administration”.

So what do analysts think? Sofie Willmott, Lead Retail Analyst at GlobalData, said it makes sense that the brand is continuing online in Britian. “As Covid-19 continues to have a devastating impact on the UK clothing & footwear market with spend forecast to decline 31.6% this year, the online channel will outperform, acting as a lifeline for many retailers whose stores have been forced to close.”

And she added that the filing could be bad news for landlords with Victoria’s Secret yet another chain seeking rent deals if it can bounce back and leaving empty spaces if it can't.

“With Victoria’s Secrets stores primarily in flagship shopping centre locations including Bluewater, Westfield Stratford and Birmingham Bullring, the administration brings more bad news for landlords that are struggling to collect rent payments,” she said. “Although administrators are looking for a buyer, if one is not found, other retailers are unlikely take on these empty units given even those performing well pre-Covid-19 have experienced a significant slump in sales and are cutting costs.

“Despite being a desirable yet expensive underwear brand when it launched in the UK in 2012, Victoria’s Secrets has since lost its appeal for many shoppers due to a lack of inclusivity. Its famous catwalk show was cancelled last year after much debate but for many of its target customer base, it was too little too late and they had already gone elsewhere.”

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