Belfast Telegraph

Thursday 17 April 2014

Shops battle to stay afloat as recession claims more victims

Thorntons suffers a meltdown and is forced to close 180 of its shops

A suggestion that multiple retailers could pay more rates to rebalance the system of small business rate relief has caused a stir in the province. But retail is in a 'Jekyll and Hyde' state of flux across the UK, according to Laura Chesters

Chocolatier Thorntons is closing 180 shops, but Hotel Chocolat is opening more outlets. Jane Norman has gone into administration, but sales at Karen Millen and Zara are booming.

TJ Hughes has collapsed, but Debenhams has just revealed an increase in like-for-like sales.

The story of the high street is a tale of Jekyll and Hyde. Although most retailers are suffering from rising inflation, higher costs and consumers cutting back, the most successful are keeping more than their heads above water. Austerity measures by the Government have finally taken their toll on the consumer, bringing a plague of falling sales, forcing the weakest on our high streets to crumble.

Although the names to have lost the battle to survive recently may not be a surprise to some - Jane Norman and TJ Hughes have been struggling for a long time - the job losses and the empty shells left in many town centres are a problem for everyone. The estimated number of jobs lost from last week's administrations is 6,000.

In the past 30 years, Britain has lost more than 300,000 shops. Last week Habitat, Jane Norman and TJ Hughes fell into administration, while Thorntons and Carpetright announced plans to close shops when the leases expire.

This is just the tip of the iceberg. Topshop's parent company, Arcadia, Dixons, Mothercare, JJB Sports and HMV all plan drastic reduction in store numbers. A quick tally finds 15,462 shops earmarked for closure.

Jane Norman had £140m of debt which was unsustainable, and it finally went into administration last Monday. Last month, Life & Style, the cheap fashion chain run by Elaine Macpherson who bought the stores when the Merseyside chain Ethel Austin went into administration on two separate occasions, went into administration for a third time.

Christine Elliott, chief executive of the Institute for Turnaround, adds: "We have seen the advent of retailers that have gone into administration more than once. This is not a healthy phenomenon."

Michael Ziff, the chief executive of the footwear group that owns Barratts and Priceless Shoes went through a pre-packaged administration in 2009. "You should not run a business in the current climate with more than a week's turnover in bank debt," he says. "The sums of money that some of the retailers have been carrying is monopoly money.

"In my old business, we were carrying too much debt, and that is where the problems started. But now we have just a small overdraft. Retailers need to keep stock tight and work with suppliers."

Following the boom-time era of cheap debt, many businesses are still heavily laden, which could have an impact on their future. The fashion chain New Look is one such retailer labouring under £1bn of debt.

What is driving the revolution on our high streets is expansion of alternative sources - from online, from retail parks and from supermarkets. The major growth is online. Verdict Research predicts that internet spending will grow by £14bn - 61% - by 2014. The structure of town centres will have to change.

Some landlords blame large supermarkets that sell everything under one roof for some towns' woes. Tom Tyler runs Chester Properties and has managed retail schemes in more than 12 towns including Walsall, Yeovil and Motherwell. He said the "worst scenario" for town centres is when supermarkets are built on the edge of town centres.

"Asda or Tesco sell everything from food to furniture to pet products to travel insurance. All the things that you might have popped in to town for."

Over the next few months more shutters will come down for the final time and more windows will be boarded up. New uses will have to be found for such shops if they are not to lie empty. But there are pockets of good news where retailers are still planning to open new stores.

Despite the difficult trading environment, overseas retailers still plan to set up shop on our shores - from the US, Urban Outfitters, Forever 21, and American Eagle, and from Europe, The Kooples and Sacoor Brothers are just a few of the names planning to open, rather than close, shops here.

Hugh Radford, the head of UK retail at property adviser DTZ, explains: "The recent administrations will provide some shops in prime locations that will be snapped up by other retailers looking to grow market share. It is only the already struggling secondary centres where these shops will stay empty."

For the best retailers, shoppers will still part with their cash, ensuring that Britain continues to be a nation of shopkeepers and not just shop closers.

We have seen retailers that have gone into administration more than once. This is not a healthy phenomenon