The UK brand is yet to pay local suppliers $37.5 million for work in progress (WIP), and $18.55 million for goods already shipped
British retailer Debenhams will close all but one of its stores in Denmark after failing a last-ditch effort to revive the ailing chain, casting a shadow of uncertainty on more than $56 million in due payments to Bangladeshi suppliers for exported goods and cancelled orders.
The brand, which used to purchase garments worth more than $110 million annually from Bangladeshi manufacturers, closed its Bangladesh liaison office on 15 April and laid off all of its 69 local employees without paying their dues and other benefits.
The payment of their dues has also become unclear after Debenhams – which had been in administration since April – made the announcement on Tuesday, reads a statement, adding that it will continue to trade through its 124 UK stores and online to clear its current stocks.
Seeking anonymity, one of the leading suppliers of Debenhams told The Business Standard, "Thirty-five Bangladeshi suppliers had shipped goods worth $18.55 million to Debenhams in January this year, and the UK retailer was supposed to pay us within March-April.
"Unfortunately, due to the Covid-19 pandemic, we are yet to get paid. Due to Debenhams closure, the payment of our dues has become even more uncertain."
He continued, "Our stock worth $4.93 million was stuck at a UK port amid the global crisis. Debenhams released the goods in June after paying us $3.69 million after a 25% discount."
The exporter, providing further details, said, "The UK buyer also cancelled orders worth $46.5 million during the pandemic. But at the end of November, they released stock worth $9 million and paid us the money.
"Debenhams is yet to pay us the rest of the dues amounting to $37.5 million for the work in progress (WIP)."
Debenhams' hopes of revitalising the company came crashing down after Arcadia – who wanted to invest in the UK retailer – also fell into administration in November. After the last remaining bidder JD Sports withdrew, Debenhams had no choice but shut down operations.
Debenhams, in a statement on Tuesday, said "Given the current trading environment and the likely prolonged effects of the Covid-19 pandemic, the outlook for a restructured operation is highly uncertain.
"The administrators have concluded that Debenhams should start a 'wind-down' of Debenhams UK, whilst continuing to seek offers for all or parts of the business."
The statement further read that Debenhams will continue to trade through its 124 UK stores and online to clear its current stocks. On conclusion of this process, if no alternative offers have been received, the UK operations will close.
Geoff Rowley of FRP Advisory, joint administrator to Debenhams and partner at FRP, said, "All reasonable steps were taken to complete a transaction that would secure the future of Debenhams.
"However, the economic landscape is extremely challenging, and coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached. The decision to move forward with a closure programme has been carefully assessed, and while we remain hopeful that alternative proposals for the business may yet be received, we deeply regret that circumstances force us to commence this course of action."
He continued, "We would also like to thank the landlords, suppliers and partners who have continued to work with Debenhams through this turbulent period and can reassure them that all contractual obligations entered into in the administration period will be met in full."
Responding to a query, Debenhams Hong Kong Ltd/Bangladesh Liaison Office's Country Manager Akhter Uddin Ahmed said, "Debenhams laid off its 69 Bangladeshi employees on 15 April, without following proper procedures and without paying due compensations.
"We sent a mail to Debenhams Hong Kong office in May, requesting the UK brand to follow Bangladesh's laws for shutting down its Liaison Office here."