Shh…the Secret is out!: Victoria’s Secret UK arm goes into administration
June 29, 2020
3 min read
What's going on here?
The UK arm of American lingerie, clothing and beauty retailer Victoria’s Secret fell into administration on 5 June 2020, putting 800 jobs at risk and potentially jeopardising the longevity of its 25 UK stores.
What does this mean?
Since coronavirus struck the UK, Victoria’s Secret furloughed 785 employees and closed all its UK stores as a result of mandated government lockdown procedures. Despite this, the UK arm reported losses of £170m in 2018-19, foreshadowing potential administrator involvement before the pandemic. In the meantime, administrator Deloitte has emphasised that there will be no immediate redundancies whilst they try to find a buyer for Victoria’s Secret. Yet, renegotiations on lease terms will take place to secure its high-street stores, and sales of company assets to a third party may be initiated.
Victoria’s Secret’s brand image was struggling prior to the pandemic, creating speculation in relation to its downfall. This was amplified by the cancellation of its annual fashion show last year which was labelled as sexist and outdated. The business has been unwilling to change its image to correspond with modern values for some time, despite many demanding an overhaul of its brand and marketing strategy to reflect changes in consumer tastes following the #MeToo movement.
What's the big picture effect?
The effect of global lockdown restrictions has certainly taken its toll on high-street operations, with 96% of retailers finding themselves in a cash flow crisis. Consumer spending has primarily shifted online, mirroring lockdown measures whilst leaving high street stores without a purpose. Financial uncertainty was already present pre-pandemic for struggling companies, since sales plunged by 1.6% in the retail sector during the last quarter of 2019. Meanwhile, big names such as Laura Ashley and Cath Kidston have called in administrators since the lockdown began, with others including Debenhams filing for bankruptcy (to see our article on that, click here). Naturally, huge concerns for the livelihoods of hundreds of thousands of employees are at stake. Whilst the government’s furlough scheme has been extended until October, it is yet to be seen whether employees’ jobs in the retail sector will still be required post-lockdown if stores are unable to weather the storm.
Inevitably, law firms are finding themselves with an increased workload as a result of the coronavirus. Victoria’s Secret’s UK arm is not the first business to seek administrative action and it is unlikely to be the last. Firms will be instructed to review employment contracts, deal with asset distribution including intellectual property, and financial and asset restructuring teams could also be called in to reorganise if companies are able to obtain a rescue deal.
Despite the above, Victoria’s Secret requires a mammoth rebirth in its outlook towards gender equality and diversity if it is going to reignite its high-street respect, and its UK presence. Competitor lingerie brands, including Savage x Fenty have long embraced diversity and inclusion (D&I) and sustainable practices, all of which are appealing to the modern consumer. Following the death of George Floyd in America, a domino effect could take place, with businesses re-evaluating their D&I strategies to confirm their values. Since Victoria’s Secret comes across undesirably in its brand image, it is representative of the fact that many businesses may need to change if they are to fit in with modern consumer values in order to keep their businesses afloat post-pandemic.
Report written by Evangeline Taylor
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