Over the last few years, we have seen many retailers either close several under performing stores through a CVA or, close their doors completely.
With lockdown in full swing, it could be that we emerge to a new retail era as many companies fight for survival over the coming weeks.
Arcadia, the fashion empire controlled by Sir Philip Green and his family, is likely to be the next virus victim as it is reported that the group are looking to close dozens more of its stores. Having already agreed a CVA with its creditors last summer, slashing rents by up to 70% and closing 23 of its stores.
It was then reported that the embattled retailer had a poor Christmas with sales falling 14% on the previous year. This led to a further round of store closures earlier this year as well as 26 outlets inside Debenhams stores closing along with the store following the announcements of Debenhams own rescue plan.
Arcadia chose to close all of its stores days before the government mandate and has furloughed 14,500 of its 16,000 staff and has said that its board members and senior leadership are taking pay cuts of between 25-50%
With Debenhams filing for Administration today (Monday 6 April) in what has been reported as a “light touch” administration, allowing the company protection from creditors during the lockdown and the ability to commence trading once trading resumed. It has not yet been confirmed how many of its 142 stores would reopen but has confirmed it is trading normally online whilst the stores are closed. This will be the second time the retailer has filed for administration in a year.
Cath Kidston also intends to appoint Alvarez & Marsal as administrators imminently following a review of their options. It is reported likely that both Cath Kidston and Debenhams will be pre-packed once the lockdown is over.
The Knock-On Effect
The lockdown is having a knock-on effect to the retail industries suppliers as it is reported an estimated £10bn of clothing piles up in warehouses, unable to be sold. Major retailers including Primark, Arcadia and Next had all stopped taking deliveries as their warehouses were full. Whilst many brands try to continue trading online, Next and Moss Bros have been forced to close these operations because of difficulties in protecting their workers from infection. It has been reported that even major online retailers have seen a slump as the nation lives in pyjamas and jogging bottoms and summer holidays seem ever more unlikely.
Last year it was reported that in the UK more than half of consumers would shop online by the year 2028. Prior to the pandemic, it was estimated at around one fifth. It seems likely that as people have been forced into online shopping during the lockdown, there shopping habits will change and the retail landscape will continue to lose those retailers carrying significant historical financial burdens, heavy rents and late entry into the online market.