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Missguided on brink of collapse as suppliers owed millions seek compulsory liquidation of fast-fashion giant

The crisis-hit company is facing a winding-up petition after creditors turned up at the retailer's headquarters in Manchester

Leading fast-fashion retailer Missguided is on the brink of collapse with millions owed to suppliers and thousands in danger of losing their jobs, i has learned.

Office workers at the online brand have stopped answering the phones as angry factory owners continually call demanding payment, a source within the company claims.

Suppliers even turned up at the retailer’s headquarters in Manchester on Tuesday after being ignored. Missguided called the police and sent all its staff home.

Three factory owners told i they are at risk of going bankrupt and one claims he had to sell his wife’s jewellery to to pay staff.

Creditors have now applied for compulsory liquidation and a petition has been lodged against the firm in what they have called a “train crash” situation. A Manchester court is due to hear the case in July.

It is claimed the brand, which shot up in popularity after securing a partnership with reality TV show Love Island, is continuing to attempt to place clothes orders with the same suppliers awaiting large sums.

Missguided has faced intense competition from British market leader Boohoo, which owns brands including Pretty Little Thing, Karen Millen and Dorothy Perkins, for years. But the Chinese fast-fashion company Shein, now valued at $100bn, has been piling on the pressure.

Supply chain disruption, overspending and inflation have combined to leave the company on the brink of collapse, with the boost in online sales during the pandemic failing to translate to profits because of rising costs.

Love Island's Dom Lever and Jess Shears making their celebrity appearance at Missguided's Bluewater store in Kent in 2017 (Photo: Future Publishing via Getty Images)
Love Island’s Dom Lever and Jess Shears at Missguided’s Bluewater store in Kent in 2017 (Photo: Future Publishing via Getty Images)

In December, the company made redundancies and tried to stay afloat by selling a 50 per cent share of the business to private equity firm Alteri, which focuses on underperforming businesses. Soon afterwards, clothing suppliers were told they would have to cut their prices by 30 per cent, even on orders they had already delivered, according to multiple sources.

A factory owner is now seeking Missguided’s compulsory liquidation in an attempt to recover their money. Another supplier supporting this creditor’s legal petition, which is set to go before a court on 26 July, said Missguided is its sole customer and owes them more than £2million.

The supplier employs nearly 100 people in Leicester but had to shut its factory earlier this month when Missguided said it was temporarily ceasing payments during a restructure. Asking to remain anonymous to protect their business, the supplier called the situation a “train crash”.

“They don’t understand the consequences of making suppliers work for margins of two to five per cent and then doing this,” they said. “The money we’re owed is not ours – it belongs to fabric mills, to trim suppliers, to payroll, to HMRC – but then overnight they say they’re not going to pay us.

“We are now trying our level best to secure new business, working around the clock, otherwise I don’t know where we will end up. I’ve sent various emails and get no response whatsoever, they’re all ignored, but then when they need something from us they call us 20 times a day.”

Missguided's founder, Nitin Passi, seen here on the right with celebrity Sofia Richie, left the troubled firm last month (Photo: Morgan Lieberman/Getty Images)
Missguided’s founder Nitin Passi, seen here with celebrity Sofia Richie, left the troubled firm last month (Photo: Morgan Lieberman/Getty Images)

Three suppliers have told i they are at risk of going bankrupt.

“I had to raise £40,000 to pay my staff’s wages, I was really in a bit of a pickle, so as a last resort last Friday we had to sell my mum’s and my wife’s gold to pay my staff wages – rings, bracelets, chains,” said the Leicester factory owner, who employs around 80 staff and is owed more than £500,000.

“My wife’s jewellery, given to her to her mum at our wedding – she sold that. My mum’s jewellery, which she’s collected over 30 to 40 years, we had to sell that. I have had to take out loans of about £100,000 secured with my property to cover the debts, we’re struggling like mad. My wife and I, we weren’t drawing any wages out of the business, we were six months late on our mortgage and our house was going to be repossessed. My sister had to help us out.”

“If Missguided goes into liquidation, Alteri will get their money first and we won’t. I think I will go bust, there will be knock-on effects and it will be hard for our staff to find new jobs. They are all really worried.”

Leicester is the UK's fast-fashion manufacturing capital and many suppliers to Missguided are based there (Photo: Darren Staples / Bloomberg via Getty Images)
Leicester is the UK’s fast-fashion manufacturing capital (Photo: Darren Staples / Bloomberg via Getty Images)

Another British factory owner, owed around £500,000, said: “I’ve got my own suppliers to pay and the clock is ticking, they’re going to come knocking on my door soon. This money isn’t going to go into our pockets, we need to pay other people, but we’re not being told anything. I’ve had to look at legal advice.”

A spokesperson for Missguided said: “Missguided is aware of the action being taken by certain creditors of the company in recent days, and is working urgently to address this. A process to identify a buyer with the required resources and platform for the business commenced in April and we expect to a provide an update on progress of that process in the near future.”

More on Fast Fashion

Several online and high-street stores have been considering launching takeovers of Missguided, with JD Sports, Asos, Shein, Frasers Group and Asda all contemplating making bids, according to Retail Gazette.

The firm’s 39-year-old founder, Nitin Passi, announced last month that he was standing down as CEO. But publicly its chair, Ian Gray, was still optimistic.

“Missguided has made substantial operational progress since receiving new investment at the end of 2021, placing us on a sounder footing in a very short space of time,” he said in April.

Insiders say the reality is very different.

One person who has been taking calls from angry suppliers said: “The only reason they weren’t getting paid was because there wasn’t enough money to pay them. People were quite optimistic after Christmas when the investment had happened. But in March and April, payments to suppliers started becoming an issue again and sales were poor. Everybody who’s been there a long time has just left because they felt so disheartened and let down.”

The latest developments will raise concerns for textile workers in the UK’s clothes manufacturing capital, Leicester, where many Missguided suppliers are based. The situation for factory workers in the city is generally thought to have improved after their exploitation by Boohoo suppliers was exposed in June 2020 but an i investigation documented last year how workers are still at risk of being paid less than the minimum wage, and directors of companies found to have broken pay laws years earlier had never been prosecuted or disqualified by the authorities.

Missguided founder Nitin Passi mixes with many stars and is seen here with TV presenter Maya Jama and musician Stormzy (Photo: Dave Benett / Dave Benett/Getty Images)
Missguided founder Nitin Passi with TV presenter Maya Jama and musician Stormzy (Photo: Dave Benett / Dave Benett/Getty Images)

Dominique Muller, policy lead at the fashion ethics campaign group Labour Behind the Label, said: “The lack of communication from Missguided is an appalling indictment on the way small suppliers and their workers are treated by large companies. These clothes have now been sold and the proceeds pocketed – leaving workers out of pocket.”

She added: “The UK government is resisting legislation that would ensure brands and retailers have legal and financial responsibility for workers in their supply chain. This needs to change… The fact that workers in the supply chain of a clothing brand are bottom of the pile when it comes to getting money during a bankruptcy, while investors which make a living out of vulture capitalism are at the top, shows this Government’s priorities.”

Lee Barron, Regional Secretary of the TUC in the Midlands, said: “The TUC is working on a Joint Responsibility Initiative, which we are in discussions with fashion brands, which included Missguided, to stop irresponsible purchasing practices, like this, from taking place. We are hugely disappointed with the miss-management shown and the blatant disregard for workers.

“This fast and loose approach has to end, particularly in Leicester or the reputation of the fast fashion brands will be tarnished beyond repair. It is time for a new approach which protects workers and guarantees orders will be paid for and contracts honoured, better and firm regulation, which include trade unions, is essential.”

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