Fashion brand Matches owed more than £200m as it was put into administration by Mike Ashley’s Frasers Group , it has been revealed.
The brand, which sells Ralph Lauren and Balenciaga, collapsed less than three months after the owner of Sports Direct and House of Fraser bought it in a cut-price deal worth £52m.
When Matches entered administration in March, Frasers Group said the business had “consistently missed its business plan targets”.
Frasers added that while Matches management team has tried to find a way to “stabilise the business”, it discovered “too much change would be required to restructure it, and the continued funding requirements would be far in excess of amounts that the group considers to be viable”.
In the year to January 31, 2023, Matches posted a revenue of £380m, down from £386.5m, while its pre-tax losses widened from £40m to £70.6m.
Matches, which also owes the brand Raey, had three stores in London as well as selling products through its website.
Why did Matches collapse?
In a document filed with Companies House, administrator Teneo said: “In the last 12 months, there has been a rise in the challenges facing the luxury fashion industry, caused mainly by a reduction in the willingness of consumers to outlay large sums on designer pieces given the ongoing effects of high interest rates and inflation.
“Pricing in the sector has recently outstripped inflation with average luxury prices having increased 32 per cent since 2019 on the back of strong demand during the pandemic.”
Teneo added that the financial performance of Matches suffered during the Covid-19 pandemic “due to an imbalance of stock and the demand for luxury fashion apparel being outweighed by that of casual and activewear which were under-represented in the group’s offering”.
The firm said that while there had been some recovery in demand, operating expenses had increased, alongside “inefficient marketing channels”, which led to losses in the business.
A turnaround plan was put in place at the end of 2022 but the wider economic environment led to another fall in consumer demand during the third quarter of 2023.
Teneo said: “As a result, and driven by competitor pressure, Matches increased investment in promotions and had a greater level of markdown activity to compete for customer spend at the expense of margin.
“The combination of these factors led to a funding requirement by the end of December 2023 which Apex Partners did not have appetite to fund and Frasers stepped in to acquire the company”.
The administrator added: “Christmas trading and performance in the first few months of 2024 were worse than expected, underpinned by a high fixed cost base and continued softening demand in the luxury fashion market.”
This led to an additional funding being required by Frasers Group considered that to be too much and it declined.
Teneo said that “without any realistic alternative sources of funds”, the directors had concluded that the business should file for administration.
How much did Matches owe when it entered administration?
According to Teneo’s document, Matches owed a £21.6m term loan to Sports Direct as a secured creditor as well as a £14m revolving credit facility.
In addition, Matches guaranteed a secured debt due to Sports Direct by MF Bidco – its parent company – of £137.8m.
Teneo said that based on currently available information it does not expect there to be sufficient asset realisations to repay Sports Direct in full.
The firm added that it estimates there will be around 256 ordinary preferential claims against Matches totalling c.£289,000.
Teneo said that it anticipates that there will be enough funds to enable these claims to be paid in full.
However, there is expected to be two ordinary preferential claims up to the value of around £15,500 against Bidco which are not likely to be repaid in full.
Matches also owed around £1.2m to HMRC which is expected to be repaid fully.
Teneo’s document also states that there are 541 unsecured creditors with estimated claims totalling around £35.9m.
The firm said that the total number of claims is expected to rise and that it is unlikely that there will be enough funds to enable a distribution to the unsecured creditors.