Some shelves have lain empty for months as Wilko struggled to pay suppliers, depriving customers of items such as household cleaning products, confectionery and even blankets.
It is a far cry from the vision of the group’s late founder, James Kemsey Wilkinson, whose focus was on shoppers “getting a good deal” as the family-owned discount chain liked to boast on its website.
For decades — ever since the first shop opened in Leicester in 1930 — Wilko has attracted customers looking for DIY products, garden tools and other household items at a low price.
But 93 years later, the future of 400 shops and around 12,500 jobs is in doubt after the business called in administrators at PwC. A cash squeeze, together with increased competition, supply chain problems and inflationary pressures all contributed to its demise.
“I know the management team has left no stone unturned in trying to save the business,” said Zelf Hussain, joint administrator and a partner at PwC. “We know that . . . it [the administration] comes during an already challenging time for many.”
For now, the stores will remain open. The immediate priority will be to try to sell as much of Wilko’s business as possible, a scenario that looks increasingly likely by the end of next week, according to people familiar with the talks. Between 200 and 300 shops could be saved, they said.
Before its demise any buyer or investor was expected to inject around £75mn, but offers are now likely to be below that threshold as interested parties can cherry-pick assets. Given it has entered administration, Wilko is now free of legacy liabilities, which makes it more attractive to prospective suitors.
Many discount chains have thrived in recent years but Wilko struggled in the face of increased competition from rivals such as B&M and Home Bargains. Its dwindling stock meant it missed out further as shoppers switched to rivals.
“A combination of supply-side problems and not enough liquidity to get those supplies back in again, has meant shrinking sales,” said a person familiar with the company’s problems. Wilko reported sales of £1.3bn in the year to January 29, 2022, down from £1.6bn in 2018.
The business, which was also co-founded by James’ wife Mary, has been owned by the family until now. In January, the founders’ granddaughter, Lisa Wilkinson, was replaced as chair by Chris Howell, but remained on the board. The Wilkinson family is not interested in bidding for the retailer, according to those familiar with the administration.
Before Howell’s appointment, directors warned there was a risk that the group could run out of cash by the end of this year if trading deteriorated further but they insisted it had enough resources to continue to operate until January 2024.
The group plunged to a £36.7mn loss before tax for the year to January 29 2022, from a £4.3mn profit the year before. However, it also paid its owners £2.25mn in dividends during the same period and a further £750,000 in February 2022, which has raised eyebrows among some industry observers.
David Steinberg, a partner at law firm Stevens & Bolton, said the administrators will have to turn their attention to “exploring possible recovery actions against directors and other third parties”.
“This will inevitably include scrutinising pre-insolvency transactions with connected parties, such as dividends to shareholders, to see whether any payments to those parties could be clawed back for the benefit of creditors.”
The Wilkinson family could not be immediately be reached for comment.
Wilko’s current management, who will remain in place to work with PwC, have the benefit of experience in retail turnarounds. Howell, who has a restructuring background, has previously worked with Mark Jackson, Wilko’s chief executive since December, at Bensons for Beds.
Some work has been done towards placing the business on firmer financial footing. In November, Wilko completed a sale and 15-year leaseback of its distribution centre in Nottinghamshire for £48mn, which helped repay and cancel a £25mn revolving credit facility.
In January, it secured an asset-backed facility of £40mn from Hilco, which also owns DIY retailer Homebase and Cath Kidston. According to Companies House filings, the lender was also given security over much of Wilko’s intellectual property, including its logo, marketing slogans and various own-label product names.
However, Hilco is not bidding for the business, according to two people familiar with the process. Hilco declined to comment.
Two rival discount chains have expressed interest as well as a couple of financial suitors that had dropped out of the process before Wilko collapsed, according to people familiar with the administrators.
PwC declined to comment.
The company’s payroll will go through this Friday as usual but uncertainty still looms for 12,500 staff, who are still at risk of losing their jobs.
Nadine Houghton, national officer for the GMB union, which represents thousands of workers at Wilko, accused the retailer of failing to invest in technology and keep up with rivals.
“GMB has been told time and time again how warnings were made that Wilko was in a prime position to capitalise on the growing bargain retailer market, but simply failed to grasp this opportunity,” she said, calling the situation “entirely avoidable”.
She was also critical of the dividends paid out. “Much needed cash was taken out of the business by the Wilkinson family even when it was struggling. GMB members have remained loyal and committed to Wilko, accepting pay cuts and cuts to terms and conditions to help the business stay afloat,” she said.
The expectation that a chunk of the stores will close will further concerns that the high street is in terminal decline, with the UK having already lost 6,000 shops in five years, according to recent figures from the British Retail Consortium and Local Data Company.
This follows high profile collapses such as Sir Philip Green’s retail empire, Debenhams, and more recently McColl’s, the corner shop chain subsequently bought by Morrisons.
“Even if PwC is successful in securing [the future of] the business it is likely that some stores will close permanently,” said Finella Fogarty, partner and head of restructuring and insolvency at law firm RPC. “Who or what will fill those sites if a buyer cannot be found?”