Fashion retailer Republic has confirmed widespread fears, declaring that it has called in the administrators.
The Leeds-based group, which has 121 stores and roughly 2,500 staff, said it had chosen accountants from Ernst & Young to take over the running of the business.
The administrators said they had already made 150 staff redundant at the group’s head office in Leeds.
Republic will remain open for business, with administrators expecting to sell it as a going concern.
Administrator Hunter Kelly said: “The brand Republic is well recognised, particularly in the North.
“It has a powerful website offering, owns well-known brand names, and has some very attractive and profitable stores.”
Republic is owned by private equity firm TPG, which bought the company in 2010 in a deal said to be worth about £300m, and now stands to lose much, if not all, of its investment.
Some private equity firms have been blamed in the past of taking a gamble with the businesses they buy, by loading them up with debt – something that allows them to lower the amount of cash they need to invest themselves, and which allows them to remove the interest payments from their tax bill.
However, according to retail analyst Nick Bubb, this did not appear to be the case with TPG’s acquisition of Republic – indeed at one point the investment group sank even more of its own money into the business in a botched attempt to turn it around.
Mr Bubb said: “I just think TPG made a mistake. “Three years ago, TPG thought they were buying a highly profitable and dynamic young fashion brand with lots of expansion potential, but they simply bought the wrong brand at the wrong time for the wrong price.”
The company misguidedly opened new stores following its acquisition, instead of focusing on its profitability, according to Honor Westnedge, retail specialist at Verdict Research.
“They came in wanting to grow the business, whereas actually what it really needed was a bit more management care and attention” said Westnedge.
Established in 1986, as men’s denim retailer in Leeds under the name Best Jeans, Republic underwent a rapid development 10 years ago, but has since seen sales weakened.
Mr Kelly of Ernst & Young said: “Republic suffered poor trading results in the autumn, and whilst sales picked up in December there has been a sudden and rapid decline in sales in late January.”
That decline in business, following the end of its post-Christmas sales, caused a drain in cash that meant the group could no longer pay its bills on time.
The company focuses on the youth fashion market, which is severely competitive and under pressure, offering brands such as SoulCal and Jack & Jones.
However, its primary demographic has been hit hard by the weak economy, according to Ms Westnedge, with young consumers experiencing a particularly high unemployment rate, as well as growing university tuition fees.
While some consumers have traded down to cheaper retailers such as Primark, JD Sports and H&M, others have gone for stronger brands such as Asos, Superdry and River Island, leaving the likes of Republic to fall behind.
Republic is currently holding a massive ‘Everything Must Be Sold’ clearance sale in all of its stores. According to the company’s Twitter account, gift vouchers and refunds have been suspended while the administrators assess the situation. An update is due as soon as possible.
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