Wilko has filed a notice of intention to appoint administrators after failing to find investment, potentially putting 12,000 jobs at risk.
Chief executive, Mark Jackson, said: “While we can confirm we’ve had a significant level of interest, including indicative offers that we believe would meet all our financial criteria to recapitalise the business, at present. Unfortunately, with this in mind, today we’re having to take the difficult decision to file a NOI [notice of intention].”
In recent weeks, the retailer’s owners had been looking to sell a controlling stake as it raced to secure the chain’s future. Although there had been a “significant level of interest” according to Jackson, no deal could be struck in time to give the retailer the cash it desperately needed.
Wilko has recorded sales declines in its last four financial years, with revenue falling by 18.6% between 2017/18 and 2021/22. It also made a £35.9m loss in its last financial year, more than its operating profit from the previous four years.
GlobalData senior data analyst Matt Walton said that the retailer has been “caught in a pincer movement” on both price and design.
“It has been outflanked on price by the likes of B&M, Home Bargains and The Range while it is unable to compete on design with the likes of Dunelm or Ikea.”
Retail analyst, Richard Hyman, added: “Wilko is a business of missed opportunities, and it must be galling for the owner family to look back at what B&M and Home Bargains have become.”
Hyman also believes there are some fundamental things holding Wilko back. One of those things is its store location.
“Wilko is a predominately high street format and that’s a mistake. A store like Wilko does not need to be on high street. It’s a mission purchase,” he said. “B&M and Home Bargains have edited ranges and focus on faster moving home-related stock. They don’t sell anything like the amount of DIY that Wilko sells.”
Bloomberg Intelligence retail analyst, Charles Allen, commented: “B&M has also moved many of its locations to retail parks, which are more convenient for many consumers, especially when they are buying bulky goods.
“Many Wilko locations are still in traditional town centres or shopping centres nearby, such locations have become progressively less attractive as other retailers have either closed or relocated to retail parks.”
The pandemic inevitably had an impact on Wilko and Hyman believes that the pandemic may have “papered over some cracks and camouflaged structural weaknesses in many businesses”.
“This is unfolding gradually as government support is withdrawn, landlords are able to resume pressure for rental payments and normal commercial relationships resume.”
Ahead of Christmas last year it deferred supplier payments and asked landlords to move to monthly rents. However, it was dealt a major blow when credit insurers Allianz Trade and Atradius pulled cover in October. This has made life difficult for Wilko ever since with many suppliers demanding payment for goods upfront, something incredibly difficult for the cash-strapped retailer to do. This has led to poor availability across its stores for the past year. Although it was given a lifeline when it secured £40m in funding from restructuring specialist Hilco late last year, it was not enough to make a notable difference to the business, leaving new CEO Mark Jackson, who took the helm late last year, hamstrung.