Fears are growing for the future of Debenhams after it appointed advisers who specialise in winding up struggling retail businesses.
Experts from Hilco Capital are drawing up plans understood to include liquidating stock if a rescue cannot be arranged for the heavily indebted department store and it collapses.
The retailer’s lenders took control of Debenhams in April as it fell into administration, the second time in a year the business has sought protection from its mounting troubles.
The 242-year-old chain was already battling falling sales on the high street before coronavirus forced it to close its stores during the lockdown.
Last week Debenhams confirmed 2,500 job cuts at its 124 stores, following on from hundreds of positions being axed at its headquarters, leaving it with about 14,000 employees.
Bankers Lazard have been appointed by the retailer's backers Barclays and US hedge funds Silver Point and GoldenTree to try to find a way of saving Debenhams, with options under consideration including a sale, bringing in new investors and joint ventures.
They are understood to want a resolution by the end of September, though retail analysts are doubtful a buyer will be found because of the parlous state of high street trading.
Hilco has worked with Debenhams before on store closures. After entering administration last year, the company had to renegotiate deals with landlords that led to it closing some stores.
As the lockdown eased and retailers were allowed to reopen, Debenhams said other stores would remain shuttered permanently, further reducing its already shrunken store estate from 142.
In a statement, Debenhams said it was “trading strongly, with 124 stores reopened and a healthy cash position. Administrators have initiated a process to assess ways for the business to exit its protective administration."
Insiders described Hilco's appointment - which was first reported by Sky News - as a "prerequisite" of Debenhams being in administration, with contingency plans needing to be made, but added the adviser coming on board did not signal a winding up of the company and fire-sale of stock and assets.
Debenhams is far from alone in feeling the pain on the high street. Last week rival John Lewis Partnership said it would cut 1,300 jobs as it closed eight stores, including its landmark 136,000sq ft outlet that is the centrepiece of Birmingham’s Grand Central scheme.