Given that we’ve already had three high profile retailers bite the dust so far this year (despite not even being half way through February), it’s really unwelcome news that Republic could enter administration by Wednesday, putting 1,000 jobs on the line. Apparently Ernst & Young is being lined up as the administrator, so it doesn’t sound like the possibility of Republic’s demise is fanciful.
Republic has struggled of late thanks to a depressed market (which did not improve much over Christmas) and poor confidence, especially in the young fashion market. With near-record youth unemployment plaguing the UK economy at the moment, it is no surprise that there is less spending in this portion of the market.
This isn’t the first hint we’ve had of Republic’s demise, however. Last week it was revealed that KPMG had been asked to look at ways of helping the chain offload some of its 121 outlets, and that the Andy Bond (former Asda CEO) was resigning as chairman of the firm.
So who’s taking the hit? It’s the owners, private equity group TPG, which bought the chain back in 2010 at a valuation of £300m. The original owners, Change Capital Partners (run by ex-M&S execs Luc Vandevelde and Roger Holmes) more than quadrupled their money by selling the chain to TPG. However, they also kept a significant stake in the business.
TPG contributed around £150m of its own equity to complete the purchase, and raised the funding to buy Republic using debt about twice the size of the chain’s EBIDTA. Pundits expect all of that equity to be lost thanks to the administration process. Ouch.
Making matters worse, TPG, its co-head David Bonderman and the founders of Republic pumped about £20m of cash into the business back in 2011, and shortly after hired former TK Maxx boss Paul Sweetenham as the new chief exec to try and breathe some new life into the business. As you might be able to tell, it doesn’t seem to have worked.
The pile of high street casualties is mounting fast this year, as January saw the denouement of Jessops, HMV and Blockbuster, which collectively have carried away 10,000 jobs with them. Just these three administrations are expected to notch the level of high street premises vacancies up to 19%.
Needless to say, that’s a record high.
UPDATE 13th February: Republic has now confirmed that it has gone into administration, and the administrators, Ernst & Young say they have already made 150 head office staff redundant.