Many retailers enjoyed a successful festive trading period with brands such as John Lewis, New Look and River Island all reporting an increase in profits for the six weeks to the beginning of January. However, fashion chains Bank and USC were less fortunate, with the former entering administration and the latter due to close a significant percentage of its property portfolio in the coming weeks.
Sports Direct, which owns the USC brand, this week confirmed that administrators have been brought in to implement the closures expected to affect around a third of USC’s 90 UK stores. Directors filed a formal notice of intention to appoint receivers at the High Court on Tuesday the 6th of January, giving the group ten days to implement any changes before insolvency must be declared.
Insolvency specialist Duff and Phelps and law firm Gallaghers have been appointed to jointly deal with any wind down as a result of the process, meaning they will be largely responsible for identifying and selling on any loss making stores in the USC property portfolio. At this point it is unclear how soon closures will come into effect, although it is likely that the first stores to close could do so as early as the beginning of next week.
Sports Direct has thus far declined to comment about the decision, but already rumours have begun to surface regarding potential locations for store closures. Furthermore, around 100 staff members at USC’s Dundonald warehouse in Scotland have apparently been told they will be made redundant, although no reason for the mass redundancies were given at the time.
USC was taken over by Sports Direct in 2011 and is the largest brand under the group’s “premium lifestyle” fashion umbrella. The group interim results release for December showed sales in the division fell by 3 per cent to £99.9 million, perhaps giving some insight into why the store closures have been deemed necessary by the board of directors.
However, another reason for the immediate closures has emerged, this time pointing the finger of blame at clothing brand Diesel. Last year, Diesel directors chose to sever their 15 year relationship with the fashion chain, which further exacerbated issues between USC and other big fashion names. According to retail magazine Drapers, numerous brands had accused USC of stockpiling items after purchasing large quantities at discounts of around 50 per cent.
It is thought that around two thirds of USC’s UK stores will continue to trade in the long term, with the remaining third expected to remain open until their future can be decided by administrators.
However, with one warehouse already winding down and around 300 of USC’s employees facing redundancy, the question is whether Mike Ashley’s first big bump in the road of recent years will have a knock on effect for other brands under the Sports Direct group’s ownership.
