What went wrong at Wilko and what happens next?

Mark Jackson, the retailer’s boss, told staff it “left no stone unturned” in order to preserve the chain but has had to start insolvency proceedings after failing to secure a rescue.

The collapse comes amid a challenging backdrop for UK high streets, with footfall dropping as shoppers increasingly go to larger out-of-town shops and consumer budgets facing pressure from continued inflation and rising mortgage costs.

Here the PA news agency looks at what led to Wilko’s collapse and what the future could hold still hold for its shops and staff.

– What is Wilko?

Wilko was founded by James Kemsey Wilkinson in 1930, opening the company’s first store on Charnwood Street in Leicester under the Wilkinson Cash Stores brand.

By 1941, the company was simply known as Wilkinsons and grew as a hardware chain across UK high streets.

The company, which simplified its name further to just Wilko in 2014, has now grown to operate about 400 stores and employs 12,500 workers in both its shops and Worksop headquarters.

As well as expanding its number of stores, the company has also grown the breadth of products it sells, to now sell the likes of pick-and-mix sweets and garden furniture alongside its traditional DIY products.

– When did it first start facing financial trouble?

The retailer had remained robust for many years despite wider challenges on the UK high street, growing as rivals such as Woolworths suffered financial difficulty.

Wilko reported strong profits for most of the 2010s and saw its turnover peak at more than £1.6 billion in 2018, but by this point had seen profitability begin to decline amid pressure on local high streets.

Turnover has decreased in every year since as it saw challenges in the sector compounded by the Covid-19 pandemic and tighter consumer budgets in the face of higher energy costs and mortgage rates.

Administrators for the company at PwC said these factors contributed to “cashflow pressure and a deterioration in trading”.

– Why did it see fewer shoppers?

Wilko also saw shopper numbers drift in recent years as it faced increased competition from rivals such as B&M and Home Bargains.

These shops have continued to grow, with shoppers going in droves to their stores which are often based in out-of-town retail parks.

Retail parks have seen footfall rise sharply in recent years to the detriment of many high streets, where Wilko has the vast majority of its sites.

Phones 4U founder John Caudwell also said it was “not surprising” Wilko faced weaker consumer demand due to a challenging economic climate.

He said: “Individuals and businesses are facing hard times as a result of inflation, post-pandemic situation and the Ukraine war, so there are hard times ahead and they aren’t going to get easier in the short term.

“With that said, it’s surprising that a business like Wilco is struggling because a DIY environment usually prospers a little bit more in hard times because people tend to do things themselves.”

– Were its stores too big and in the wrong places?

Retail analyst Richard Hyman told the PA news agency the retailer’s store estate has also been a hindrance for its recent trading.

“The stores they have are a burden and mostly too big,” he said.

“They have excess space where they are selling a wide variety of products which they probably shouldn’t be selling to start with, stretching into all sorts of different markets.

“They are quite large for a lot of high streets, so have the expense of rents and rates associated, but also don’t have the practicality of retail parks, let’s say.

“There isn’t parking next to a lot of these stores, so for many people it doesn’t make sense to go there to buy large amounts of paint, or other core things like that which they sell.”

– Why enter administration?

Chief executive officer Mark Jackson said Wilko was left with “no choice” but to formally enter administration on Thursday after failed rescue talks.

The company had tried to find someone to buy the whole company in a solvent deal but were unable to secure this in recent days.

Administrators are appointed in order to temporarily protect the company from legal challenges by creditors, but will ultimately seek to sell the firm, in whole or in parts, in order to settle any outstanding debts.

-What happens next?

PwC advisers Jane Steer, Zelf Hussain and Edward Williams were appointed as joint administrators on August 10.

They will now hold further talks with potential interested parties to see if they can sell them Wilko or certain parts of the business.

The administrators will also help to ensure the retailer can continue to trade while this process takes place, and ensure staff are paid during this time.

– Who might buy Wilko’s stores or brands?

PwC could face a challenge in selling the business in its current form, given it was unable to secure a full solvent sale before administrators had to be appointed.

Private equity companies Gordon Brothers and Alteri are among firms who reportedly held an interest in buying Wilko and could still seek to buy the business.

If they bought the company, it is expected they would offload a number of its loss-making stores and potentially cut jobs.

Mr Hyman told PA that other retail groups could be interested in a deal for its stores but stressed that its main UK competitors are unlikely to snap up swathes of shops.

“The types of shops they have won’t really appeal to B&M and Home Bargains, I think,” he said.

“They might buy three or four each if the process comes down to that. But I think the most likely people to buy lots of stores would be less recognisable.

“Pepco (which owns Poundland) could buy stores in order to launch the Pepco brand over here, because those shops are a bit different to Poundland and could do well.

“The other name to look out for is Action, owned by 3i Group, who are massive in Europe but have no presence here.”