Claire's. A rescue is a bargain.
Claire's is closing 154 stores and cutting 1,300 jobs, eight months after it was reportedly saved. A rescue and a bargain are basically the same thing.
THE GIST ON CLAIRE'S: "Dead Stock"
What happened to Claire's?
Eight months ago the ear piercing giant went into administration. Modella Capital swooped in, bought 156 stores, and the headline said it had been saved. Jobs protected, brand lives on. Eight months later, almost every one of those stores is closing anyway.
What does a rescue actually buy?
When a company goes into administration, the buyer doesn't buy the company. They buy the bits they want: the brand, the stock, the best leases. None of the boring stuff, like debt, contractual liabilities and pension obligations. It becomes a completely new business at a fraction of what it was originally worth.
Why does it fail anyway?
The market that killed the original is exactly the same, so the same thing happens again, just slower.
Who pays?
The cost of the rescue is paid by everyone but the buyer. Landlords take rent cuts, suppliers take pennies on the pound, HMRC absorbs the unpaid tax. Everyone else funded the deal and the buyer got the upside. Now the stores are closing anyway, and the suppliers, the taxman and the landlords who paid for the rescue get nothing.
It's a pattern now: Toys R Us, Wilko, Claire's, BHS. Can you guess who's next?
Is buying a firm out of administration a rescue?
Your take. One tap, then see how everyone else voted.
Quick answers
What does a buyer get in an administration rescue?
The brand, the stock and the best leases, but not the debt, contractual liabilities or pension obligations.
Who pays for the rescue?
Landlords take rent cuts, suppliers get pennies on the pound and HMRC absorbs the unpaid tax.
Which other retailers followed this pattern?
Huw names Toys R Us, Wilko and BHS.
See you on the next one.
What should the next one be? Suggest a topic for Huw to explain
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