days are long gone. Missguided, founded by Nitin Passi in 2009, shocked the retail industry after declaring that it had fallen more than £80 million ($136 million) in debt. The company officially entered administration in May and was later bought by the Frasers Group, the owners of Sports Direct and House of Fraser, for a mere £20 million, despite raking in £177 million in annual revenue just before the pandemic. But even after being saved, Missguided’s troubles are far from over. Unpaid suppliers have threatened to file an official complaint to the UK’s Insolvency Service and are considering legal action against the company’s private equity owners. Thousands of customers have also been left out of pocket as the e-tailer has not responded to any requests for refunds or undelivered orders. The company’s administrator, Teneo, which is running Missguided in the transitional weeks before the Frasers Group takes over, is not in a position to pay refunds requested from before it was appointed. Missguided’s former warehouse operator, GXO, has not guaranteed the fulfilment of any orders amid negotiations either. But how did this fast fashion giant collapse so quickly and what lies ahead for Missguided under new management? Self-inflicted wounds “All our wounds were self-inflicted,” Passi said. “For me, it was a very humbling experience.” Signs of trouble at Missguided began in 2018, when the company found itself with a £26.5 million earnings before interest, tax, depreciation and amortisation (EBITDA) loss. At the time, Passi admitted he was not sure if the company could afford to keep operating or pay his employees. “I put a big team around me, I put a lot of expense in the business. We consumed too much cash too quickly and we didn’t have the right people in the right roles.” Among the expenses were the two physical stores opened at Westfield Stratford City, London, and Bluewater Shopping Centre near Kent. The stores were an undeniable money pit, as profits failed to cover the operating costs. After three years, both stores were closed. The company was also spending an astronomical amount on marketing. Aggressive sale cycles had the brand discounting products to ridiculously low prices – a strategy that birthed the £1 bikinis as a publicity stunt. These sales eventually led Missguided at a loss, which forced Passi to slash the marketing budget. Despite the high expenditure, the e-tailer was not able to pull customers as effectively as rivals Boohoo and PrettyLittleThing. A combination of mismatched celebrity pairings and overspending in the wrong places left Missguided behind the competition. In an effort to save the company, Passi sold a 50 per cent stake to Alteri Investors to inject some cash into the company late last year. He also reduced business budgets significantly, made more than 15 per cent of staff redundant and shortened product lead times to outperform other ultra-fast fashion brands. The initiatives succeeded at improving Missguided’s profitability but the damage had been done. The company still owed suppliers millions and the police were called to Missguided’s head office in Manchester over the claims. In April, not long after Alteri took over the controlling stake and the board, Passi stepped down from his role as CEO. A bumpy high street Before the pandemic, things were starting to look up for Missguided. After the company experienced a loss in 2018, Passi had managed to get a hold on spending and Missguided returned to the black with an EBITDA of £3.5 million in 2019. The early half of the pandemic was also fruitful, as sales of joggers and other loungewear products shot up by 700 per cent during the lockdowns. Missguided’s results for FY20 showed sales had increased 8 per cent, to £202 million, although profits reduced slightly. The company made £2.1 million EBITDA and a £5.2 million operating loss, down by about £3.6 million from the previous year. Unrelenting lockdowns eventually took their toll, however, eliminating an integral part of Missguided’s business – trendy party wear. During these stages of the pandemic, the entire retail ecosystem was on the brink of collapse. Disruptions in the supply chain increased the cost of goods and shipping steeply. Competitors like Boohoo were also affected; last year, the rival company revealed profits had fallen by 94 per cent on a pre-tax basis, due to “significantly increased logistics costs”. Overall, Boohoo’s pre-tax profits plummeted to £7.8 million, from £124.7 million in 2020. UK’s original online behemoth, ASOS, faced similar challenges in cost, as it reported a £15.8 million loss, after profit of £106 million. For Missguided, however, the pandemic was the final nail in the coffin. Even the new owners, Alteri Investors, were unable to close the increasing gap in profitability and by May of this year, Missguided called in Teneo. Missguided’s future Fast forward to present day, Missguided is now a stand-alone business under the Frasers Group. Frasers CEO Michael Murray firmly believes both companies stand to benefit from the deal. “Missguided is a fantastic brand which, with the strength and scale of Frasers’ platform and our operational excellence, is well-positioned for the future,” Murray said. “Under Frasers’ ownership, and with Nitin’s partnership, Missguided has an exciting future ahead. “Missguided’s digital-first approach to the latest trends in women’s fashion will bring additional expertise to the wider Frasers Group.” Following the sale of the company, 147 Missguided staff members were transferred to the Frasers Group, while 87 roles were made redundant. The group also announced that Passi would be returning as CEO of the company. On his return and the future of Missguided, Passi said, “Frasers Group has an unrivalled platform and fantastic operational know-how, giving Missguided a solid foundation on which we can build a successful future. “I am acutely aware of the impact Missguided’s administration has had on our stakeholders and I am committed to rebuilding their trust.” As for the previous investors, Alteri is set to receive at least £18 million of the £58 million it put into Missguided. Meanwhile, administrators Teneo said they were considering legal action to pursue the repayment of a £569,000 loan made to Rajib Passi, the father of founder Nitin. Rajib Passi is not expected to be repaid any of the £24.7 million he loaned the group to support it in recent years. However, Nitin has agreed to repay a loan of £333,000 he took from the company. One lesson that retailers can take away from the saga of Missguided’s collapse is that cash is truly king. Many of the retailer’s missteps can be boiled down to cashflow issues that could have been avoided under stronger operation management. Missguided’s failure to manage its finances eventually veered the entire company off-course and soured relationships with its most valuable stakeholder, the suppliers. But now, with the support of its new owners and their deep pockets, Missguided could return to the shining glory that it once had.