As Wilko collapses into administration, could a new owner turn its fortunes around?

Wilko this week announced it had gone into administration, following months of money woes, job cuts and struggling to find investment.

The discount chain’s financial performance has been deteriorating since 2017/2018 and it swung to a loss in 2021/2022, which proved particularly detrimental.

Shuffling its management team, winning financial backing from Hilco and drafting in property adviser CBRE still wasn’t enough to secure Wilko a future in UK retail and now chief executive Mark Jackson is focused on a “robust turnaround plan”.

Hilco and Mike Ashley’s Frasers Group were rumoured to be in the running to acquire the floundering retailer, but both have been ruled out.

Two private equity houses and B&M are still thought to be in talks about a potential deal to save the business and 12,000 jobs. Here’s what the new owners of Wilko will need to do to turn the business around.

Fixing availability

For Wilko’s new owners to get it back on track, the retailer needs a serious overhaul of its availability.

Empty shelves, lack of innovation and higher pricing have put customers off as there are competitors out there who may offer something better.

GlobalData senior analyst Matt Walton says other discounters “outflank Wilko in terms of price”, whereas homeware retailers such as Dunelm and Ikea are beating it with better design.

“Wilko needs to give shoppers a reason to shop there,” he says.

“The likes of B&M, Home Bargains and The Range resonate with the customer as they are more price-sensitive, so that can be very challenging to compete with.” 

Wilko could also benefit from adding and extending its ranges to offer more options for customers as there are some product areas where it is lacking.

“Wilko should consider moving back into categories like toys as it has opted to focus on DIY, pets and garden,” says Retail Week senior analyst Wendy Massey.

“Can it really offer a valid DIY and garden proposition on the high street? It feels as though some of its core categories are mainly used by customers for emergency top-ups and the company should really consider destination categories.”

Store estate

Having a store on the high street usually works in a retailer’s favour, but this has not been the case for Wilko.

Many high streets across the UK are littered with vacant stores and charge extortionate rents, making them not the best location for a value-led retailer.

Retail Week data and insights director Lisa Byfield-Green says Wilko has “underinvested stores” on high streets where post-pandemic footfall has not recovered quickly.

“Rivals such as B&M and Home Bargains are offering bigger, brighter stores on retail parks and this is where opportunity for the brand could lie in future, if an investor for the brand is found,” she says.

Customers make an effort to travel to retail parks and out-of-town destinations where they typically spend more time and money in stores.

Walton thinks Wilko being situated in central locations has “contributed to its downfall” and means customers are not as dedicated to visiting its stores. 

The value retailer should follow its competitors into out-of-town locations as it will likely benefit from more profitable sites.

Supply chain

Over the past few months, the value retailer has also been dogged by supply chain problems.

Wilko stores across the country have seen unoccupied shelves, which the retailer put down to “some distribution issues”.

Covid and logistical issues driven by Brexit have made it difficult for Wilko to keep shelves stocked, and this was amplified when it failed to pay suppliers and lost credit insurance from at least one player.

“The attraction of Wilko was always that customers would go in for a mission-based purchase and walk out with additional bargains,” says Byfield-Green.

“If the item that customers go in to look for is missing, then in all likelihood customers will walk out of the store empty-handed.”

She believes Wilko should prioritise hiring supply chain experts to address cost, availability and stock issues so that customers are no longer put off by deserted shelves.

Overhaul of multichannel

While many value retailers have been investing in their store estate, Wilko has been committed to multichannel development.

The retailer invested in the rollout of click and collect, which was completed across all stores in February 2023. 

Massey says this would have been “costly and will have seriously impacted the bottom line”.

“Driving down online fulfilment costs had been a priority for a while, but now perhaps management needs to focus on the core stores business,” she says.

Putting investment into its online offering on hold could prove rewarding for Wilko. Rival B&M recently pulled the plug on ecommerce home deliveries to focus on stores.

Racking up £40m in debt to lender Hilco means Wilko has got to think about where it invests its money and Walton thinks the retailer should put the emphasis on the short term.

“I think [multichannel] is something to possibly do down the line, but it needs to stabilise itself first,” he says.

“There’s no point investing in something like click and collect if the business goes under.”