It’s not the first retailer to go into administration and it won’t be the last, but the well-known high street retailer Peacocks will continue to trade for the foreseeable future thanks to Edinburgh Woolen Mill.
The administrators were called in at the beginning of 2012, as Peacocks total debt reach £750 million and it was unable to restructure £240 million of this debt. Edinburgh Woollen Mill has bought the company out of administration, protecting 6000 jobs in the UK. However, at the same time more than 3000 workers will be made redundant, as 224 stores cease trading.
Throughout the recession, retailers across the UK have been struggling, as household incomes have remained low, causing consumer spending to fall. One of the administrators from KMPG, commented that:
‘This (the low consumer demand), combined with a surplus of stores and unsustainable capital structure, led to the business becoming financially unviable.’
The coming months will be crucial in determining whether more jobs are lost and if there are any further store closures. Much hinges on the ability of Edinburgh Woollen Mill to stabilize the financial performance of Peacocks and stimulate renewed customer demand. The following articles consider this take-over.
Peacocks closes 19 Ulster stores with 263 job losses Belfast Telegraph (23/2/12)
Peacocks Takeover: Edinburgh Woollen Mill buy retailer but 3,100 jobs lost BBC News (including video) (22/2/12)
Peacocks piqued by PIKs Guardian, Nils Pratley (22/2/12)
Edinburgh Woollen Mill buys Peacocks Independent, James Thompson (23/2/12)
Peacocks sold to Edinburgh Woollen Mill – KPMG The Wall Street Journal, Jessica Hodgson (23/2/12)
Questions
- Why has consumer demand in the retails sector fallen during the recession?
- What type of take-over would you classify this as?
- Who are Peacocks’ main competitors? In which market structure would you place the retail sector? Explain your answer.
- The Guardian article refers to the Management-buy-out of Peacocks in 2005. What is a management-buy-out? What were the problems associated with it?
- What are the problems that have been identified as causing Peacocks to go into administration?
- To what extent do you think the Management-buy-out of 2005 is the main reason why Peacocks has fallen into administration?