Missguided, a fast-paced fashion brand, has filed an official complaint with the Insolvency Service and is considering legal action, so activists say it was a “reckless approach” by private equity owners. company.
Missguided on Monday called on managers of advisory firm Teneo after months of searching for new funds after the boom in online clothing sales during the pandemic reversed when stores reopened. British fast fashion retailers have come under heavy pressure from supply chain costs and delivery delays as they struggle with new entrants such as Shein from China.
More than a dozen UK-based suppliers, most in Leicester and Manchester, say they are collectively owed millions of pounds on orders, some of which were made as late as last month and they demanded deliveries even on Monday, the day Missguided entered the administration. .
The company continues to market while looking for a buyer, but customers complain on social media that they have not received delivery of orders and are still waiting for refunds.
Meanwhile, it is understood that hundreds of workers in UK factories have lost their jobs as garment manufacturers struggle to find new business.
Activists said some Leicester factories are completely dependent on Missguided’s business, which was founded in 2009 by Nitin Passi. He left in April, a few months after private equity group Alteri bought a controlling stake and took seats on the board. Ian Gray, former CEO of Tottenham Hotspur Football Club and chairman of the organic vegetable business Abel & Cole, was named Missguided’s chief executive last month.
One vendor said it was considering legal action, believing Missguided could have acted fraudulently if it had continued to place orders while “the administration was on the horizon.” Two vendors said less than six weeks ago the company had told them everything was “as always”.
Nadeem Arshad, owner of Manchester-based fashion retailer Moku, said his business was “on the verge of collapse” as he owed almost £ 500,000 for recent orders and is now seeking advice. and joins forces with other suppliers who are in this catastrophic position. “
Another said that his complaint to the Insolvency Service said that Missguided had “bought us clothes in the last three months despite knowing that the company was in trouble and did not think about all the costs behind the manufacturing our products “.
Alex Jay, head of insolvency and asset recovery at Stewarts Law Firm, said: reason for a claim.
“The question will be whether the continuation of the negotiation has increased the overall deficit owed by the company to its creditors as a whole, that is, whether the directors have worsened the position by keeping the company alive for longer than they should. “Waiting to turn the business around. If they do, then the claims can be made.”
Another insolvency expert, Brian Burke of the consulting firm Quantuma, said it was unlikely that there would be a “short-term solution” for suppliers to whom they owe money and that any legal action would take time. He added that they would probably have to wait for trustees to assess how much they could expect to pay unsecured creditors and added: “Unfortunately for most, I guess they will look at significant losses.”
Activists called on the government to improve protections for suppliers and their workers, who said they were at the “bottom of the pile” with no guaranteed payment from administrators.
In an open letter to business department ministers, Labor Behind the Label said the government had not “taken a significant step in overseeing the misconduct and abusive branding practices” following its report on the industry. of Leicester clothing in 2020. He accused Missguided of a “reckless approach” to managing its suppliers.
“UK law is silent on corporate financial and legal responsibilities to supply chain workers. Suppliers and supply chain workers are at the bottom of the pile as unsecured creditors in bankruptcy proceedings. That is deeply unfortunate, “the letter said.
Meanwhile, several former employees are considering legal action against the company for allegations that the dismissal process was not handled properly.
A former employee said: “The whole company had a conference with 25 minutes notice, people who weren’t there or on annual leave missed it. and that our services were no longer necessary.
“Many colleagues discovered that they had lost their jobs through social media. Everyone is devastated.”
The company and its administrators declined to comment.