These success stories give examples why
When two notable brands such as Paperchase and M&Co go into administration within days of each other, the process itself starts to make the headlines.
Unfortunately, there is a lot of misconception involved which can lead to people getting the wrong impression of administration and confusing it with other insolvency procedures.
Administration is when an external manager or administrator is appointed by a company to come in and run the business temporarily to see if they can manage to turn things around sufficiently.
If things don’t work out as planned then there are other options available including liquidation but this is not the default setting that many assume administration to be. It’s not a waystation on the way, but can be a springboard to future success.
Don’t believe us? Here are some current examples of how an administration has rescued and allowed these famous names to rebound onto the high street and internet once more with added momentum.
HMV
HMV returned to profitability this month for the first time since it was brought out of administration in 2019 by the owner of Canadian record stores Sunrise Records.
This was mainly due to the revival and growth of vinyl record sales in 2022.
15 underperforming stores including the flagship Oxford Street location were closed after the acquisition but the brand has started to reopen more stores again as performance has improved.
As part of the new growth strategy, the business has consciously moved away from selling CDs and DVDs and is focussing on vinyl sales as well as other pop culture memorabilia and products such as books, tee shirts and collectables.
HMV also benefited from successfully negotiating better rents from various landlords.
Pre-tax profits rose to £1.97 million for the financial year ending 30 May 2022, up from a loss of £243,000 the previous year.
Bensons for Beds
Bensons for Beds was brought out in a pre-pack administration deal in June 2020 and has returned to profit some 18 months later.
It reported an increase in like for like sales of 7% year on year to the end of 2020.
New owners Alteri Investments has invested in the company including creating a new ecommerce platform alongside store refurbishments and in some cases relocations.
The new management made several key changes including separating the brand from its former sister company Harveys which it shared 140 stores with.
It opened 35 new stores in 2022 and plans to open a further 180 in the coming months and years ahead. They have also announced plans to accelerate their digital offering and enhance their logistics network to improve customer experience, speed up delivery times and increase capacity.
The company has recovered so successfully that they have bought another business – Eve Sleep – out of administration in October.
Mamas & Papas
The child and toddler retail sector suffered a huge blow in 2019 when Mamas & Papas went into administration in the same week that rivals Mothercare collapsed.
Since then the new owners’ new approach of concentrating on concessions in other high profile stores such as Next and Marks & Spencers and revamping the website has proven successful.
The business returned to profit in the 2020/2021 financial year and continued to make progress in 2021/2022 with its gross earning rising to £11 million and sales improving by 35% to £126 million.
Monsoon Accessorize
Founder Peter Simon bought the business back in a pre pack administration deal in June 2020 and has been rewarded with a profitable 2022 as a result.
The retailer looked closely at restructuring options following the move including renegotiating contracts with suppliers and leases with its landlords. While this was ongoing it also revamped its websites, spruced up its stores and looked again at its product line including making a concerted effort to return to the firm’s ethnic based roots.
As a result group sales jumped 43% to £258 million to 31 August 2022 with annual like-for-like retail sales more than doubling. Gross profit also doubled to £24.4 million as the business’ more flexible and lower cost base helped their margin improve by 5%.
During administration, management reduced the brand’s store portfolio but has reversed this strategy now it’s been able to open 19 stores in 2022 with plans for an additional 22 to open this year including looking at new stores in key European airports.
LK Bennett
Clothing retailer LK Bennett went into administration in March 2019 following a drop in sales due to unsustainable price increases, rising business rates at many stores and the knock-on effects of House of Fraser also going into administration in the same month.
They were bought by Chinese-owned franchise operator Rebecca Feng and saw sales and profits rising last year thanks to store upgrades and increased investment in digital channels.
Profits have risen 55% to £21.7 million up to 31 January 2022.
New clothing categories are being introduced including bridal and new stores in London, Edinburgh and Portsmouth have helped spur the recovery.
If your business is experiencing a rough patch but essentially is a sound business requiring an opportunity to recover and resurge then an administration might be a realistic option to consider.
We offer a free initial consultation for any business owner or director who wants to discuss the circumstances their company faces in more detail and explore what options are available to them.
Administration might not ultimately be the best choice but after a conversation with one of our experienced expert advisors, they will thoroughly understand why.