Suppliers to the online fashion retailer Missguided are expected to be paid less than 2% of the £30m owed to them by its main trading entity after the company collapsed in May.
The group will pay out less than 1.7p in the pound to factory owners supplying its main brand after it collapsed with long-term debts of more than £80m, up from £57m in 2021, an administrators’ report sent to creditors this week reveals.
“It’s just a massive kick in the teeth,” one supplier told The Guardian.
Unsecured creditors are owed £46m in total, including money owed to suppliers, HMRC and employees.
Administrators at the advisory firm Teneo said they were meanwhile considering legal action to pursue repayment of a £569,000 loan made to Rajib Passi, the father of founder Nitin Passi.
Rajib Passi, however, is not expected to be repaid any of the £24.7m he loaned the group to support it in recent years, while Nitin has agreed to repay a loan of £333,000 he took from the company.
Missguided’s private equity backer Alteri, which stepped in to try to rescue the group late last year, will receive at least £18m of the £58m it put into the online retailer, after the sale of its intellectual property to Mike Ashley’s Frasers Group for £20m. The tax authorities will also receive £530,000 in respect of VAT, employers’ national insurance and other payments.
The report says that Missguided, which grew rapidly after being founded in 2009, got into difficulties as sales at its main trading entity sank 42% from a peak of £282.1m in 2021 to £198.1m this year as pandemic restrictions were unwound and high street shops reopened.
Underlying losses, before debts and accounting adjustments, widened to £37m from £10m as costs rose, including an 88% rise in the cost of distribution to the US.
The financial problems reveal the scale of difficulties facing online retailers that had banked on demand for their services staying high as the pandemic subsided and have been taken by surprise by shoppers’ return to the high street.
The Canadian e-commerce group Shopify said this week it was making about 1,000 jobs redundant, 10% of its global workforce, as the chief executive, Tobi Lütke, admitted his bet that a surge in online sales would outlast the pandemic “didn’t pay off”.
Missguided was saved from collapse last autumn when Alteri stepped in, buying a controlling stake and taking seats on the board. Nitin Passi subsequently left the company. But the deal failed to stem the group’s problems.
Suppliers to Missguided have filed an official complaint to the Insolvency Service over what campaigners say was “a reckless approach” by the company’s private equity owners.
Several Leicester factories were entirely reliant on business from Missguided and are struggling to survive.
Missguided is now a standalone business within Frasers Group, which includes House of Fraser department stores, Sports Direct and the Flannels fashion chain.
Frasers bought the group out of administration after Teneo was unable to secure a last-minute rescue bid for Missguided, which made headlines with its £1 bikini three years ago, selling them at a loss as a marketing stunt.
On Thursday, Frasers announced it had snapped up online fast-fashion specialist I Saw It First, saying it would benefit from integration with Missguided.
Nitin and Rajib Passi did not respond to a request for comment.