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As the dust settles on the collapse of Matches, the impact on the luxury industry is becoming clearer.
More than 540 luxury brands are owed a total of £35.9 million from the luxury retailer, based on current estimates — and it’s unlikely any of them will get that money back. If they do, the repayments are expected to amount to less than a penny back for every pound owed, a report by administrator Teneo Financial Advisory reveals.
The brands owed the most following its collapse are Toteme (£945,132), Gabriela Hearst (£780,042), Gucci (£553,339), Burberry (£467,526) and Max Mara (£438,792).
The report shows that 190 brands have tried to retrieve a combined £22.8 million worth of stock through retention of title (ROT) claims (ROT clauses allow suppliers to retain ownership of their goods until payment has been made in full). However, supporting evidence has only been provided for claims amounting to £6.4 million of stock, and Teneo has deemed just £3.4 million of those viable. Claims amounting to around £1 million have been rejected because “no valid ROT clause was present in contracts with Matches or the clause had not been effectively communicated to them”.
“A lot of people, at the inception of their business, download a document pack online and think they’re protected because they have ROT clauses stipulated within them — but they’re not necessarily enforceable,” Marco Piacquadio, director of insolvency firm FTS Recovery, previously explained to Vogue Business. “Administrators will push back with a very robust argument: ‘We’ve got a duty to the general body of creditors, and their collective interests outweigh that of one supplier.’” (FTS is working with the British Fashion Council to support designers affected by the Matches collapse.)
Matches and its parent company Bidco owe Frasers Group a total of £209.4 million in loans. The administrator does not expect there to be sufficient funds to repay this in full. The £289,000 owed to employees for arrears of wages, holiday pay and pension contributions is expected to be repaid, as will money owed to HM Revenue and Customs.
The report also shows that 11 offers have been made to acquire Matches and/or certain assets within the business, and negotiations for a potential sale are underway. It did not divulge the names of the bidders.
Matches continues to trade and generated £38.7 million in sales between 8 March 2024 and 5 April 2024, driven by promotional activity on the site.
What led to the collapse?
The report details the events that led to Matches’s administration. Teneo points to the “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”. It notes that 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.
Matches also suffered during the Covid pandemic when demand shifted to casual and activewear, which were underrepresented in the group's offering.
“An operational and financial turnaround plan was put in place at the end of 2022. However, the wider economic environment led to another fall in consumer demand during the third quarter of 2023 with a knock-on impact on volumes and stock levels across the wide luxury market,” the report states. “As a result, driven by competitive pressure, Matches increased investment in promotions 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 [Matches’s private equity owner] Apex Partners did not have the appetite to fund, and Frasers stepped in to acquire the company on 20 December 2023.”
Frasers subsequently invested £33 million in the business. However, Christmas trading and performance in the first few months of 2024 were worse than expected, underpinned by a continued softening of demand in the luxury fashion market, the report says. And Frasers deemed further investment “unviable”.
Teneo said it received a call on 5 March 2024 to discuss options for the business and was asked to take the pending appointment as administrator “shortly thereafter”.
“The purpose of Matches administration is to achieve a better result for creditors as a whole and would be attained through an immediate liquidation,” Teneo concludes. “The strategy adopted has increased realisations and reduced the level of claims, thereby increasing the distribution available to creditors. The strategy has also enabled the joint administrators to market the business for sale, which will likely result in significantly greater value being realised and would have been achieved if the business immediately ceased to trade.”
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