The Wilko name may live on but job losses are inevitable

Published

2 years ago

August 21, 2023

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An update on the future of Wilko, the collapsed discount and variety retailer, is expected imminently from its administrators PwC.

The former family-owned company went into administration two weeks ago – making it the third biggest casualty in the retail sector during recent years after Sir Philip Green’s Arcadia empire and the department store chain Debenhams.

Sky News revealed a week ago that PwC had given prospective buyers until last Wednesday to submit initial offers for some or all of the business.

It is now working through those offers.

Wilko’s 12,500 employees were given some cause for optimism when, on Friday afternoon, the GMB union said that, after meeting with administrators, there were “genuine grounds for hope”.

The union’s national secretary, Andy Prendergast, said there had been “expressions of interest from organisations who are considering taking over at least some parts of the business.”

Among those who have been linked with a potential acquisition of former Wilko assets are its chief rivals, including the FTSE-100-listed B&M; Poundland, which is owned by Warsaw-listed Pepco Group; and The Range and Home Bargains, both of which are privately owned.

Sky News has also revealed that, prior to its collapse, Wilko also held talks with the private equity firms Gordon Brothers, which owns Laura Ashley; OpCapita, whose assets include the Football Pools and Alteri, which owns Bensons for Beds.

They may also be interested in parts of the business.

Yet it is far from clear whether any buyer would want the entire Wilko business which, at the time of its collapse, operated some 400 stores.

Wilko had, prior to its demise, been seeking rent cuts at a number of its stores – a significant number of which were not trading profitably.

Industry speculation is that, at best, buyers will be found for between 200-300 outlets.

Reports at the weekend suggested that would-be buyers have submitted offers for between 40-50 stores but that one potential buyer has offered to retain as many as 300 outlets.

That means some redundancies are inevitable.

There is, though, some residual value in some of the sites. The data analytics and consultancy group Global Data has reported that the UK discount and variety retail sector is set to grow by 5% per year during the next five years to more than £57bn in total.

Therefore, even though the market is intensely competitive, it will be worth competitors acquiring some Wilko sites.

That was certainly the case when, in 2008, Woolworths collapsed. Nearly a quarter of the old household favourite’s 800 or so former stores were acquired by the very names now being linked with acquisitions of some or all of Wilko – Poundland and B&M – although, two years after the failure of Woolies, some 300 stores had yet to be bought and remained unused.

Poundland acquired 57 former Woolworths stores, 47 were bought by the 99p Stores chain (which was bought by Poundland in September 2015), B&M picked up 43 while Poundstretcher acquired 22.

As with Woolies, some former Wilko stores may also end up in time being acquired by supermarkets. Iceland was the biggest single buyer of former Woolworths stores, picking up 59 of them, while other sites vacated by Woolworths were acquired by Tesco, Sainsbury’s and Waitrose.

Buyers, though, will be discriminating in the former Wilko outlets that they take on.

Clive Black, retail analyst at investment bank Shore Capital and widely regarded as one of the industry’s best sector-watchers, told clients last week: “One significant factor contributing to Wilko’s collapse is the location of its stores, primarily situated in high streets and shopping centres. These areas have experienced a notable decrease in footfall, reportedly around 30% lower, compared with levels before the pandemic.”

Mr Black said that made a bid for the entire Wilko estate unfeasible.

He added: “It might be more plausible for B&M to concentrate on acquiring stores located in out-of-town retail parks. These locations tend to be less affected by the structural decline in foot traffic seen in town centres and secondary malls.”

It also seems possible that the Wilko brand itself will attract interest. The trade publication Marketing Week last week highlighted evidence from YouGov’s BrandIndex platform which suggests that, even after going in to administration, Wilko’s overall ‘brand health’ – a measure of how it is perceived by consumers – is stronger than the retail sector as a whole and significantly ahead of Home Bargains, B&M and Poundland.

Marketing Week reported: “In the past year, Wilko has also consistently outperformed these rival retailers on both quality and value perceptions…Wilko is perceived as being much better quality than B&M, Home Bargains and Poundland.”

That means the brand may live on. The Sun reported at the weekend that one of the potential bidders speaking with PwC has expressed an interest in retaining the Wilko name. It is likely that this would be for the purposes of retaining an online presence. Brands such as Topshop – previously owned by Arcadia – and Debenhams both live on as online-only brands.

But Wilko may yet retain a physical presence, too. A template here could be Paperchase, whose brand name and intellectual property was acquired in January after it collapsed into administration by Tesco.

So there are plenty of possibilities for some of Wilko’s assets – which is why speculation has begun to circulate that it may not until some time next week before PwC can provide an update.

What is certain, though, is that Wilko will not continue in the form in which it did prior to its collapse.

Business

Trump trade war escalation sparks global market sell-off

Published

15 hours ago

April 3, 2025

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Trump trade war escalation sparks global market sell-off

Donald Trump’s trade war escalation has sparked a global sell-off, with US stock markets seeing the biggest declines in a hit to values estimated above $2trn.

Tech and retail shares were among those worst hit when Wall Street opened for business, following on from a flight from risk across both Asia and Europe earlier in the day.

Analysis by the investment platform AJ Bell put the value of the peak losses among major indices at $2.2trn (£1.7trn).

The tech-focused Nasdaq Composite was down 5.8%, the S&P 500 by 4.3% and the Dow Jones Industrial Average by just under 4% at the height of the declines. It left all three on course for their worst one-day losses since at least September 2022 though the sell-off later eased back slightly.

Trump latest: UK considers tariff retaliation

Analysts said the focus in the US was largely on the impact that the expanded tariff regime will have on the domestic economy but also effects on global sales given widespread anger abroad among the more than 180 nations and territories hit by reciprocal tariffs on Mr Trump‘s self-styled “liberation day”.

They are set to take effect next week, with tariffs on all car, steel and aluminium imports already in effect.

Price rises are a certainty in the world’s largest economy as the president’s additional tariffs kick in, with those charges expected to be passed on down supply chains to the end user.

The White House believes its tariffs regime will force employers to build factories and hire workers in the US to escape the charges.

Economists warn the additional costs will add upward pressure to US inflation and potentially choke demand and hiring, ricking a slide towards recession.

Apple was among the biggest losers in cash terms in Thursday’s trading as its shares fell by almost 9%, leaving it on track for its worst daily performance since the start of the COVID pandemic.

Concerns among shareholders were said to include the prospects for US price hikes when its products are shipped to the US from Asia.

Other losers included Tesla, down by almost 6% and Nvidia down by more than 6%.

Many retail stocks including those for Target and Footlocker lost more than 10% of their respective market values.

The European Union is expected to retaliate in a bid to put pressure on the US to back down.

The prospect of a tit-for-tat trade war saw the CAC 40 in France and German DAX fall by more than 3.4% and 3% respectively.

The FTSE 100, which is internationally focused, was 1.6% lower by the close – a three-month low.

Financial stocks were worst hit with Asia-focused Standard Chartered bank enduring the worst fall in percentage terms of 13%, followed closely by its larger rival HSBC.

Among the stocks seeing big declines were those for big energy as oil Brent crude costs fell back by 6% to $70 due to expectations a trade war will hurt demand.

The more domestically relevant FTSE 250 was 2.2% lower.

A weakening dollar saw the pound briefly hit a six-month high against the US currency at $1.32.

There was a rush for safe haven gold earlier in the day as a new record high was struck though it was later trading down.

Sean Sun, portfolio manager at Thornburg Investment Management, said of the state of play: “Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”

He warned there was a big risk of escalation ahead through countermeasures against the US.

Sandra Ebner, senior economist at Union Investment, said: “We assume that the tariffs will not remain in place in the
announced range, but will instead be a starting point for further negotiations.

“Trump has set a maximum demand from which the level of tariffs should decrease”.

She added: “Since the measures would not affect all regions and sectors equally, there will be winners and losers as in 2018 – although the losers are more likely to be in the EU than in North America.

“To protect companies in Europe from the effects of tariffs, the EU should not respond with high counter-tariffs. In any case, their impact in the US is not likely to be significant. It would be more efficient to provide targeted support to EU companies in the form of investment and stimulus.”

Business

British businesses issue warning over ‘deeply troubling’ Trump tariffs

Published

15 hours ago

April 3, 2025

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British businesses issue warning over 'deeply troubling' Trump tariffs

British companies and business groups have expressed alarm over President Donald Trump’s 10% tariff on UK goods entering the US – but cautioned against retaliatory measures.

It comes as Business Secretary Jonathan Reynolds launched a consultation with firms on taxes the UK could implement in response to the new levies.

Money blog: Pension top-up deadline days away

A 400-page list of 8,000 US goods that could be targeted by UK tariffs has been published, including items like whiskey and jeans.

On so-called “Liberation Day”, Mr Trump announced UK goods entering the US will be subject to a 10% tax while cars will be slapped with a 25% levy.

The government’s handling of tariff negotiations with the US to date has been praised by representative and industry bodies as being “cool” and “calm” – and they urged ministers to continue that approach by not retaliating.

Business lobby group the CBI (Confederation of British Industry) said: “Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices”.

Industry body the British Retail Consortium (BRC) also cautioned: “Retaliatory tariffs should only be a last resort”.

‘Deeply troubling’

While a major category of exports, in the form of services – like finance and information technology (IT) – has been exempted from the tariffs, the impact on UK business is expected to be significant.

Mr Trump’s announcement was described as “deeply troubling for businesses” by the CBI’s chief executive Rain Newton-Smith.

The Federation of Small Businesses (FSB) also said the tariffs were “a major blow” to small and medium companies (SMEs), as 59% of small UK exporters sell to the US. It called for emergency government aid to help those affected.

“Tariffs will cause untold damage to small businesses trying to trade their way into profit while the domestic economy remains flat,” the FSB’s policy chair Tina McKenzie said. “The fallout will stifle growth” and “hurt opportunities”, she added.

Companies will need to adapt and overcome, the British Export Association said, but added: “Unfortunately adaptation will come at a cost that not all businesses will be able to bear.”

Watch dealer and component seller Darren Townend told Sky News the 10% hit would be “painful” as “people will buy less”.

“I am a fan of Trump, but this is nuts,” he said. “I expect some bad months ahead.”

Industry body Make UK said the 25% tariffs on cars, steel and aluminium would in particular be devastating for UK manufacturing.

Cars hard hit

Carmakers are among the biggest losers from the world trade order reshuffle.

Auto industry body the Society of Motor Manufacturers and Traders (SMMT) said the taxes were “deeply disappointing and potentially damaging measure”.

“These tariff costs cannot be absorbed by manufacturers”, SMMT chief executive Mike Hawes said. “UK producers may have to review output in the face of constrained demand”.

The new taxes on cars took effect on Thursday morning, while the measures impacting car parts are due to come in on 3 May.

Business

Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Published

15 hours ago

April 3, 2025

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Economists immediately started scratching their heads when Donald Trump raised his tariffs placard in the Rose Garden on Wednesday.

On that list he detailed the rate the US believes it is being charged by each country, along with its response: A reciprocal tariff at half that rate.

So, take China for example. Donald Trump said his team had run the numbers and the world’s second-largest economy was implementing an effective tariff of 67% on US imports. The US is responding with 34%.

Trump latest: UK considers tariff retaliation

How did he come up with that 67%? This is where things get a bit murky. The US claims it studied its trading relationship with individual countries, examining non-tariff barriers as well as tariff barriers. That includes, for example, regulations that make it difficult for US exporters.

However, the actual methodology appears to be far cruder. Instead of responding to individual countries’ trade barriers, Trump is attacking those enjoying large trade surpluses with the US.

A formula released by the US trade representative laid this bare. It took the US’s trade deficit in goods with each country and divided that by imports from that country. That figure was then divided by two.

So, in the case of China, which has a trade surplus of $295bn on total US exports of $438bn, that gives a ratio of 68%. The US divided that by two, giving a reciprocal tariff of 34%.

This is a blunt measure which targets big importers to the US, irrespective of the trade barriers they have erected. This is all part of Donald Trump’s efforts to shrink the country’s deficit – although it’s US consumers who will end up paying the price.

But what about the small number of countries where the US has a trade surplus? Shouldn’t they actually be benefiting from all of this?

That includes the UK, with whom the US has a surplus (by its own calculations) of $12bn. By its own reciprocal tariff formula, the UK should be benefitting from a “negative tariff” of 9%.

Instead, it has been hit by a 10% baseline tariff. Number 10 may be breathing a sigh of relief – the US could, after all, have gone after us for our 20% VAT rate on imports, which it takes issue with – but, by Trump’s own measure, we haven’t got off as lightly as we should have.