With consumer confidence on the rise, and the retail industry seeing widespread recovery, administrations have slowed significantly in the past year. However, retailers which do not correctly meet the needs of consumers are still at risk – a situation which fashion retailer Internacionale has discovered to its cost this week.
After narrowly avoiding administration last July due to a debt pile-up of £19 million, Internacionale remained in business but continued to operate at a loss of £10 million per year. As a result, administrators from PwC are due to be called in at the end of this week, and at present the brand is expected to enter liquidation if a buyer cannot be found within the next few weeks.
The news comes only a week after corporate restructuring specialist firm FC Fund Managers took control of the business by buying Internacionale’s £35 million worth of debt. 20 staff were immediately made redundant at the company’s head office in Glasgow, with the remaining 20 employees only guaranteed their positions until the brand liquidates in around “three to four months” according to a source within the company.
Although two companies, as yet unidentified, have expressed an interest in purchasing some of Internacionale’s 97 shops throughout the UK, it seems that “Plan A” is still the liquidation of the brand. In fact, the process seems to have begun already with the closure of the company’s Swansea and Cardiff stores, indicating that FC Fund Managers are actively seeking a resolution to the debt crisis as quickly as possible.
Previous owners Raj Sehgal, Naresh Abrol and William Milton – who were the former chief executive, managing director and finance director respectively of Internacionale – purchased the business in a pre-pack deal during the turmoil last July. However, despite the fact that Sehgal had been attempting to turn around Internacionale’s fortunes since 2011 when he became chief executive, administrators from Ernst & Young had not been optimistic about the business’ potential.
Joint administrator Tom Jack said at the time; “High street retailers have faced unprecedented conditions over recent years, and the market for fashion clothing has become increasingly competitive.
“The business has been significantly loss making over recent years and although the directors have sought to restructure and reposition Internacionale, with significant cash investment from shareholders, it has not proved possible.”
Should the business enter liquidation, it will mean the loss of 1,500 jobs for store assistants located throughout the UK as well as the remaining 20 staff members running the company from the head office. Yet with the new owners seemingly set upon this eventuality, it seems that this is the most likely outcome – demonstrating once and for all that the High Street’s problems are not over yet.
