The struggling discount chain Wilko has warned it could run out of money if it is unable to secure additional financing by the end of next year.
The family-owned chain swung to a loss of £30 million as sales fell by 3.2 per cent to £1.3 billion in the year to January 29, amid disruption from lockdowns, snarled supply chains, “unprecedented” cost rises and a tightening labour market. That compares with profits of £2.6 million on sales of £1.36 billion the previous year.
It warned in its annual accounts that its funds would be “extinguished” by the end of December 2023 if the economic environment remains volatile and sales decline significantly, a scenario it considers to be “severe but plausible”. However, Wilko’s directors said they were confident the group would be able to secure the funding it needs.
They said: “This committed financing is not in place as at the date of approval of these financial statements and as such, this represents a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern.”
The Wilkinson family has built Wilko into a nationwide chain of 413 stores with 16,000 staff after establishing the company’s first hardware store in Leicester in 1930. It has sought to alleviate financial pressures by securing a £48 million 15-year sale and leaseback agreement on its distribution centre in Worksop, Nottinghamshire, with the logistics supplier DHL.
Wilko used the proceeds to pay off its revolving credit facility but is now seeking an emergency loan of £30 million, with lenders likely to charge high rates of interest. The Wilkinson family, who own the company through Amalgamated Holdings Wilkinson, took a £3 million dividend from the business ahead of the sale-and-leaseback deal.
Jerome Saint-Marc, Wilko’s chief executive, said: “Last financial year was tough for retail and that has continued into this year. We’ve remained focused on cost control and driving sales, as well as making some material changes to the way we operate in the face of difficult trading over the past two years.
“Our relationship with our lending partners is solid. We’re taking this opportunity . . . to review how we manage our ongoing financing to best trade through the current retail environment while continuing to invest.”
The retail sector has shown signs of stress after both Made.com and Joules fell into administration. Next has purchased Made.com’s brand and website, while administrators are seeking a buyer for parts of the Joules business.