In the latest sign of retailers battening down the hatches Debenhams is considering renting space in its flagship London department store to a hot desking firm.
The retailer is in talks to rent floor space to flexible-office provider WeWork, as it looks to scale back its high street presence.
The state of UK retail’s ill-health
Retailers that have gone bust 2017-18
Toys R Us: 180 stores employing 3,000 staff, collapsed 28 February. Owed £15m in VAT, due by 1 March.
Maplin: 200 electronics and gadget stores, founded 1972, also failed 28 February.
Warren Evans: went into administration earlier in February.East: fashion brand with nearly 50 outlets folded in January.
Juice Corp: business behind brands including Elizabeth Emanuel and Joe Bloggs went under in January.
Multiyork: furniture chain with 50 stores went into administration in November.
Feather & Black: bedroom furniture and bedding specialist with 25 outlets collapsed in November.
Retailers under pressure
New Look has debts of more than £1bn and has lost some of its credit insurance cover, which protects suppliers if a retailer goes bust. In the 10 months to Christmas, sales fell 11% and losses hit £123m. The company intends to close 60 stores and change its fashion ranges, but faces a struggle to win back young shoppers.
House of Fraser’s Chinese owner, Sanpower, had to stump up £25m to see the store through Christmas and its debt is rated as junk. The retailer is attempting to reduce the size of its stores by 30% and has asked landlords to cut rents.
Debenhams, a 178-store chain and more than 200 years old, is axing one in four of its managers and considering closures to cut costs. It has warned that profits have been hit by lower than expected sales, with lower profit margins as a result of having to cut prices to match rivals.
Photograph: Tony Margiocchi / Barcroft Images/Barcroft Media
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Last year Debenhams chief executive Sergio Bucher announced a shake-up of the 240-store chain that would close 10 shops, downsize others and strike partnerships with outside firms. It has already teamed up with Sweat! to open three gyms in surplus space.
Retailers, including the major supermarkets, have been trying to get rid of excess space by bringing in other brands, cafes or restaurants, but are yet to tap into the market for shared office space. The talks with WeWork, a fast-growing American company, are said to be at an early stage, according to Bloomberg which first reported the discussions.
Debenhams pruned its store management teams last month with 320 jobs going as part of a £10m cost-saving plan launched in the wake of a disappointing Christmas.
Bucher is also facing pressure from its biggest shareholder, Mike Ashley’s Sports Direct, which last week upped its stake to 29.7%, just shy of the level that would trigger a bid for the company.
Separately, it emerged that House of Fraser’s Chinese parent Sanpower is set to hand control of the struggling chain to another investor.
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In 2014 the conglomerate, controlled by one of China’s richest men, Yuan Yafei, acquired an 89% stake via its department store arm Nanjing Cenbest.
The group promised to invest in the British chain but there has been little to speak of just as the business is struggling. In a stock market announcement on Tuesday, Nanjing Cenbest said it was in talks to sell 51% to Wuji Wenhua, a Chinese leisure group.
“Nanjing Cenbest is in advanced discussions with Wuji Wenhua with a view to Wuji investing in House of Fraser,” it said in a statement. “We believe that Wuji Wenhua can be a strong strategic equity partner as they possess vast experience in the leisure sector and have access to a large network of travellers.”
Like Debenhams, House of Fraser wants to cut the size of stores in an effort to slash its rent bill after a tough Christmas. House of Fraser said the proposed share sale would have no impact on the day-to-day operations, declaring: “It is business as usual.”