In the days after Wilko collapsed into administration in August, expectations from workers were high that the majority of jobs and stores at the 93-year-old discount retailer could be saved.
Employees were told by the GMB union, which represented many of the chain’s 12,500 staff that there were “genuine grounds for hope” that a buyer would swoop in as negotiations began with a handful of interested parties over its 400 shops.
Five weeks on, with no saviour in sight, almost all of them are facing redundancy. Many are spending their final days in Wilko’s employment overseeing dispiriting closing down sales across the country as the chain is wound down.
A slimmed-down offer from Doug Putman, the Canadian owner of HMV, who at one stage was looking at potentially acquiring the majority of stores, fell through on Sunday.
Approaches from M2 Capital, fronted by chair Robert Mantse, descended into a war of words with administrators at PwC, after the investment firm was unable to prove it had the funds to back a deal that it claimed would have safeguarded Wilko’s future.
Meanwhile, rivals B&M and Poundland have cherry-picked 122 stores from the Wilko estate, in desirable locations, which are set to open under their respective brands.
So why couldn’t Wilko — a well-known high street name in a sector which is thriving during a cost of living crisis — be saved?
Those involved with negotiations over Wilko’s future said the chain ultimately required too much investment to be revived while other complexities made it hard to divide the store estate into chunks under the Wilko brand.
“I was prepared and able to make the financial investment required, had a viable deal gone through to get the business back on its feet,” Putman told the Financial Times in an emailed statement.
He added that his firm, Putman Investments, had substantial funding in place to acquire Wilko and turn it round, but said that further due diligence uncovered a litany of legacy problems that rendered it unsalvageable.
“The underlying costs of running Wilko’s infrastructure systems would have made it extremely challenging to run the business economically,” he added.
A person familiar with the business said the retailer’s back-office operations, warehouses and IT systems were set up to run a large estate, which could not be “cut in half in a short period of time”.
Even before its demise, any buyer or investor was expected to inject around £75mn.
Another hurdle for any suitor would have been negotiations with suppliers, in particular the larger consumer goods companies, who expected cash on delivery for any new stock, while smaller suppliers were more amenable to supplying on credit. Agreeing payment terms to restock shelves and get the stores trading again after a brief period when no new products were flowing into Wilko’s warehouses was a challenge, Putman added.
Depleted stock levels also meant that a couple of lenders who were interested in backing a bid subsequently walked away as there were not enough assets to lend against, according to three people familiar with the matter.
“Retail lenders will advance money on the basis that there is X amount of stock in the business,” a restructuring executive explained. “‘For every pound of stock, we will provide you with 60p of funding’.”
Meanwhile the administration process became more chaotic due to a row between M2 Capital’s Mantse, who maintains that the process run by the administrator was not fair and transparent, and PwC.
An email seen by the FT from PwC’s lawyers Shoosmiths to Mantse said that many of his “communications have been aggressive in nature and contained various expletives and threats including various messages left on WhatsApp voice notes for a PwC employee”.
Mantse, who did not comment at the time about how his proposal was funded or on the Shoosmiths communication, said then: “M2 Capital is not giving up on this, our firm belief is justice for all. I’m saving the 12,500 jobs that need to be saved.” He did not immediately respond to a fresh request for comment.
PwC previously said that it “wholeheartedly reject[ed] the assertions and characterisations” and that it was “running a fair and transparent sales process”.
Zelf Hussain, joint administrator, said: “We worked relentlessly to find a solution that would’ve saved the business as a going concern and preserve jobs . . . “We’re confident the deals that have been announced will provide a platform for future employment.”
Ironically the intense interest in Wilko’s future sparked by its administration has lifted the chain’s profile and sales. The prospect of the doors shutting for the final time in the coming weeks has brought shoppers out on the hunt for bargains — boosting the amount that can be recouped for stakeholders.
Figures from data firm Kantar this week showed 3mn people shopped there in August compared to 2.4mn in July. Its market share of non-food groceries such as toiletries and household goods was 0.5 percentage points higher month-on-month as people hit the closing sales.
“There is never one challenge that causes the demise of a business,” said Diane Wehrle, insights director at research company Springboard. “For Wilko, it was a blend of increasing competition, losing sight of what its core offer was and high costs.”
Attention is now turning to what value there is left in the business, the brand name and website having been acquired on Thursday by rival The Range for an undisclosed amount.
Hilco, the specialist retail investor that has been facing scrutiny, including from the GMB, over its dual role as a lender to Wilko before it collapsed and now as its liquidator of stock, has provided additional cash to the administrators to replenish the stores’ shelves as the business is wound down, according to two people familiar with the matter.
People close to PwC and Hilco strongly denied the suggestion that there was a conflict of interest, adding that the cash injection allowed PwC more time to find a buyer for all or part of the retail chain.
Hilco — which is Wilko’s biggest secured creditor — and lender Barclays are expected to be repaid in full, according to people close to the liquidation, as are HMRC and the arrears of wages and holiday pay for employees.
The pension trustees should get £20mn from Wilko’s property assets, although it is unclear what the pension deficit is. However, unsecured creditors, such as suppliers and landlords, are unlikely to be paid in full, according to a person close to the process.
Criticism has also been directed at the family owners who have been paid tens of millions in dividends in the past 10 years. The most recent payment of £750,000 was in February 2022.
Jonathan Griffin, a director at Amalgamated Holdings Wilkinson Limited, the ultimate owner of Wilko, said dividend payments did not contribute to Wilko going into administration and said they “were paid within the financial framework regulating dividend payments and after the Wilko board had received a recommendation from the chief financial officer that it was prudent to pay them”.