Wiggle making “considerable trading profit” with administrators “optimistic” over sale of business

Wiggle’s administrators say that they are “optimistic” that the business will be sold, and have revealed that since the business entered administration in October, trading has been “very positive” resulting in a “considerable trading profit.”

Alex Massey and Anthony Wright of insolvency specialists FRP Advisory Trading were appointed on 18 October this year as joint administrators of the business, which had been acquired by Germany-based Signa Sports Holding (SSH) in 2021.

Wiggle, already facing the challenge of tougher market conditions after the end of the pandemic-driven cycling boom, had been plunged into financial crisis shortly before entering administration after the withdrawal of previously committed funding of €150 million to SSH, intended to provide operational finance to its subsidiaries, by SSH’s owner, Signa Holding.

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In a Notice of Administrators’ Proposals dated 15 December and published yesterday on the Companies House website, the administrators said that following their appointment and assessment of the company’s financial situation, it was agreed following consultation with management “that the best course of action was to continue to trade the business while a buyer was sought.”

Wiggle’s entry into administration came in the weeks leading up to Black Friday, a crucial trading period for online retailers, and one in which the business was highly visible with a wide range of products on sale at deep discounts.

According to the Notice of Administrators’ Proposals, “trading has been very positive during the administration process with a considerable trading profit achieved.” The administrators added that they had “taken the opportunity to augment stock held within the business with opportunistic purchases to generate additional website traffic and profits.”

The positive trading result in the weeks since Wiggle entered administration suggests that far from being akin to a so-called fire sale, in which a business discounts all stock at a loss simply to shift it – and which may indeed have been the case for some products – across its whole operation, Wiggle managed to achieve a positive operating margin, ie the profit generated as a percentage of turnover.

Deep discounting has continued beyond Black Friday, with Wiggle’s website currently promoting an “Epic Winter Sale” with up to 70 per cent savings on offer.

In an Appendix to the Notice of Administrators’ Proposals, it is revealed that according to the company’s latest management accounts, in the 12 months to September 2023 – the month before Wiggle entered administration – turnover was £204.2 million, down 17.4 per cent on the previous year. Gross profit stood at £45.4 million, but a net loss of £42.6 million was recorded.

A separate Appendix contains an extract from Wiggle’s income and expenditure account for the period 24 October 2023 – a week after it entered administration – to 12 December. Income for that period is stated as £19.7 million, with expenditure of £9.5 million, resulting in a positive balance of £10.2 million.

So far as the potential sale of the business is concerned, the administrators confirmed that initially, details were circulated to 58 parties following a marketing exercise conducted by FRP Advisory’s corporate finance team, as well as approaches received after their appointment had been reported in the media.

An independent valuation of the company has been completed, although the results are being withheld while the sale process continues, with 24 interested parties, seven of which have met at least once with Wiggle’s  management team, signing non-disclosure agreements enabling them to access confidential financial statements and other information.

The administrators, who recently confirmed that Wiggle’s future strategy will see it focus exclusively on the UK with dedicated websites serving specific overseas markets closed down, said that the deadline for fully funded offers to be submitted was 4 December.

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“Given the sale process is ongoing, it is not appropriate to provide further details at this stage and all creditors will be updated in our first progress report,” they added, saying that while they “are optimistic that a transaction will be completed the timescales depend upon due diligence and negotiations.”

Some staffing cuts have been made, however. At the date of the administrators’ appointment, Wiggle had 447 employees at its head office in Portsmouth and distribution centre in Wolverhampton, but the Notice of Proposals confirms that “in order to maintain operations it was unfortunately necessary to implement two rounds of redundancies that have affected a total of 77 employees.”