Ayrshire-headquartered fashion clothing chain d2 yesterday became the latest major high street casualty, with some 300 jobs in Scotland and a total of about 800 posts under threat as a result of its collapse into administration.
d2 was formed in 1999 with the combination by high-profile entrepreneur Sir Tom Hunter of former Fosters Menswear shops and Alan Kinney and Jim McGonigle’s Jeans for Sale outlets, and expanded in 2000 with the purchase of some Jeanster stores. It has fallen victim to tough trading conditions in the worst UK recession since the Second World War, after a lengthy period of heavy losses.
Hunter sold his majority stake in the d2 clothing and footwear retail business to Kinney and McGonigle about two years ago. This deal left Kinney and McGonigle, who previously had a minority stake, between them owning the vast bulk of d2, which was making heavy losses around the time Hunter sold out.
Administrators from accountancy firm BDO said yesterday that they would continue to trade the d2 business, which has 76 stores in the UK, in the hope of finding a buyer for all or part of it.
All of these UK stores, 23 of them in Scotland, remain open meantime. However, the administrators yesterday closed two of three outlets which d2 had in Dublin in the Republic of Ireland, with the loss of 39 jobs.
The administrators also made 22 of the 44-strong head office staff of d2 at Dundonald in Ayrshire redundant.
Bank of Scotland, now part of Lloyds Banking Group, is banker to d2. In d2’s latest published accounts for the year to January 31, 2008, auditor Johnston Carmichael highlighted a “material uncertainty” over the company’s “ability to continue as a going concern”.
Kinney would seem likely to be at least examining the potential for a bid for some of the more viable stores in the d2 portfolio, possibly in conjunction with McGonigle. Whether or not any such deal comes to pass will depend on the attitude of the various landlords who lease shop premises to d2, and on the views of Lloyds Banking Group and the administrators.
Various high-profile Scottish retail collapses in the current recession have been the subject of “pre-pack” deals, where the purchases of stores by existing owners from the administrators have been announced at the same time as news that the businesses have fallen into administration.
Hunter himself bought back the best parts of his USC clothing business when it collapsed into administration in late December last year, in the type of pre-pack deal which has proved controversial with creditors of struggling retailers.
In March this year, Glasgow entrepreneur Tarak Ramzan’s Quiz clothing chain collapsed into administration but he and his family bought the vast bulk of it back immediately.
And, in May, the same fate befell Scottish fashion retailer Cruise. It had debts of £15m but survived through an immediate “pre-pack” acquisition led by the existing management team. d2 employs 110 full-time and 140 part-time staff in its 23 Scottish stores, in addition to its head office staff north of the Border. It also has 29 warehouse staff at Dundonald. Its total workforce had been running at about 830, about 390 of them part-time.
The staff who remain at d2 after yesterday’s 61 redundancies now face an anxious wait to see whether or not all or part of the business can survive. Various parties involved with the administration were emphasising yesterday that it was early days in this regard.
With the New Year holiday, it is likely to be next week at the earliest before it becomes any clearer whether there are any serious potential buyers of parts or all of d2 on a going concern basis.
BDO said its business restructuring partners, James Stephen and Dermot Power, had been appointed joint administrators to d2 chain owner D2 Trading at about 11am yesterday. Announcing the two closures in Dublin, BDO added: “The joint administrators intend to continue trading the rest of the outlets with a view to selling all or part of the company as a going concern.”
Stephen said: “It is unfortunate that the economic climate and difficult trading conditions have significantly affected the retail sector. We are continuing to trade the business and hope to sell all or part of the company as a going concern.”
Asked if the administrators would be likely to consider any buy-out bid from Kinney if such an offer were to materialise, a BDO spokeswoman underlined the administrators’ hope of selling all or part of the business as a going concern.
She added: “I would imagine the administrators would welcome any offers.”
Hunter, although he has sold out of d2 completely, remains the company’s landlord in respect of the head office and warehousing premises at Dundonald occupied by d2.
A spokesman for Hunter revealed yesterday that the entrepreneur had been approached about the possibility of reducing the cost of these premises for d2.
The spokesman said: “Obviously, we will look at that very sympathetically going forward. If we can do something to help, we will help.”
Amid all the talk of buoyant post-Christmas sales, yesterday’s news of the collapse of d2 is a timely reminder that trading conditions for some on the high street remain very tough indeed.These tough times are likely to continue for many months.
This recession has already claimed big names such as variety retailer Woolworths and music, DVD and computer gaming retailer Zavvi, as well as a raft of sizeable Scottish-based casualties. The Borders bookshop business in the UK has been another casualty, although it appeared to be hit harder by online competition than the recession.
There is a significant danger that further familiar retail names could tumble into insolvency in coming months as the UK economy struggles to eke out a recovery.
