By Archie Mitchell
Victoria’s Secret’s U.K. arm has collapsed into administration — the latest victim of shoppers staying at home because of the coronavirus lockdown and fierce competition from online rivals.
Deloitte has been appointed administrator to renegotiate lease terms in an attempt to save the business, owner L Brands /zigman2/quotes/202062875/composite LB +5.57% and Deloitte said on Friday.
The Big Four accountancy firm appointed to take control of the company said the lingerie retailer had become a victim of the coronavirus outbreak. Lockdown rules in the U.K. saw nonessential retail outlets shuttered in late March.
“The effect of the lockdowns, combined with broader challenges facing bricks-and-mortar retailers, has resulted in a funding requirement for this business, resulting in today’s administration,” said Deloitte administrator Rob Harding in a statement.
Retailers have been under a lot of pressure in recent years due to rising costs, increased competition and changing shopping habits — the stay-at-home orders in the U.K. and U.S. have not helped.
U.K. outfitters Cath Kidston and Laura Ashley fell into administration in March as high street stores, struggling for years, were dealt final blows by the pandemic. Meanwhile, U.S. department-store operators J.C. Penney and Neiman Marcus have also filed for bankruptcy since the outbreak of the virus after years of increasing competition from online retailers.
Nonessential stores in England are allowed to reopen on June 15, and in the U.S. all 50 states have taken measures to reopen their economies.
Victoria’s Secret’s global interim chief executive said in a statement that the aim was to renegotiate leases or sell the loss-making division entirely as part of a turnaround plan for the lingerie retailer. L Brands, which has seen profit fall consistently since 2016, reported net losses of $366 million for the year ending Feb. 1 on sales of $12.9 billion.
“We are taking a number of actions across Victoria’s Secret and Victoria’s Secret PINK to strengthen and position the business to succeed as a separate stand-alone company. As part of that profit-improvement plan, we are addressing the operating losses in our 25 U.K. stores,” said interim chief executive Stuart Burgdoerfer. “[Deloitte] will seek to restructure the U.K. lease terms [and] explore options for a sale of that portion of business or other alternatives.”
Victoria’s Secret stores in the U.S. and elsewhere won’t be affected by the administration process, and in the U.K. online sales are to continue as normal.