The shops are set to be rebranded under B&M’s name, as the FTSE 100 retailer did not acquire Wilko’s brand name or any of its intellectual property.
B&M will only take over the stores once the administration trading period ends, when administrators determine they can no longer keep the shops open themselves. That date is currently still unknown. B&M said it would provide an update on the timing of the new B&M openings in November.
B&M is the first firm to rescue any of the Wilko empire from collapse, with the remainder of the business still up for grabs.
The deal comes amid reports that a larger rescue deal, from HMV owner Doug Putnam, hit a snag, meaning a large number of stores may be forced to close.
Redundancies began at Wilko’s head offices yesterday, with warehouse staff also set to lose their jobs this week, as there were no bids on the table that included Wilko’s support staff.
However, this deal ensures that a number of shop staff will still be able to keep their jobs.
B&M said it would pay for the shops via cash reserves. It did not reveal which shops were included, or whether this meant all staff at these stores would keep their jobs.
Andy Prendergast, GMB National Secretary, said: “Every single redundancy is a person who will wake up facing an uncertain future. This needs to be on the forefront of everyone’s minds.
“The reality is years of mismanagement have led us here.
“We are still doing everything we can secure a deal that would protect the majority of jobs and stores. But this will be of little comfort for those not knowing how they’ll pay their bills.”
Administrators at PwC took over Wilko last month, after attempts to sell the entire business failed. They have aimed to sell as many stores as possible in order to realise value for the retailer’s creditors.
According to Sky News, Canadian Putnam, who led the revival of HMV, had hoped to buy around 300 of Wilko’s 400 shops. However, after difficulties with suppliers, he is now expected to purchase closer to 200 stores.
Wilko, formerly known as Wilkinson Hardware Stores, has 400 shops in total, employing around 12,000 people.
Other discount retailers including Poundland parent Pepco and The Range have been named in reports as potential buyers of Wilko shops.
Orwa Mohamad, analyst at Third Bridge, said: “B&M’s ambition to get to 950 has been given a significant boost by the potential cherry picking of Wilko’s best stores, i.e. the ones that are most profitable.” “B&M’s general focus on out-of-town locations means it can incorporate many of Wilko’s high street stores and locations with limited cannibalisation impact.”
“From an assortment perspective, there’s a high degree of crossover between Wilko & B&M in households, garden, toys, accessories. Quite often, Wilko & B&M sell the same product, meaning consumers have a strong incentive to continue frequenting those stores regardless of the banner.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘’Wilko’s collapse is B&M’s gain, given that the successful value retailer had made no secret of wanting to open more shops across the UK. The soon-to-be vacant premises were easy picking for B&M and it is likely that the retailer has been ultra-choosy when it comes to cherry picking locations.
“Part of B&M’s successful model is its significant footprint in easy to access retail parks, so stores where it’s easy to load up a car are likely to be in high numbers in the deal. It’s unclear at this stage how many jobs might be saved by B&Ms move. A good chunk of positions should be salvaged, but B&M is likely to want to run a highly efficient ship, to squeeze as much profit out of the floorspace.
“The deal hasn’t set the stock alight, instead it’s still languishing in the red, after an earlier downgrade of the company alongside with Tesco and Sainsbury’s by JP Morgan. However, it has regained some ground since the news of the deal broke, with some investors hoping it could be a spur to sale growth, especially given how focused consumers are on seeking out value right now.
“Hopes for a larger white knight rescue of the Wilko chain have been clouded in a dust of uncertainty. A bid from Doug Putman the Canadian businessman and owner of HMV UK is understood to have financing but administrators are dealing with demands from suppliers to be paid, before a deal can be reached. At the most, it looks like a scaled down bid for the chain will be clinched, which would save the famous red and white frontage but Wilko’s presence on the high street would be a pale comparison to its heady days of success.’’
Julian Skelly, managing partner for retail at consultancy Publicis Sapient, said: “Wilko’s challenge is that it hasn’t managed to keep up with changing customer expectations and behaviours. Their low-cost, discount model relies on heavy footfall in their relatively large-format high-street stores.
“The pandemic accelerated retail customers’ transition to online and away from the high-street. Initially, the impact of this on Wilko was masked by the government’s Covid support but Wilko was significantly exposed when customers didn’t return to their stores in the same way post-Covid.”
B&M shares were already down bby more than 6% this morning before the announcement, following a downgrade from analysts at JP Morgan.
After announcing the deal, shares picked up and are trading at 551.2p, still down 15.8p for the day.