Partner Article

Retail administrations increase by 15%

Retail administrations in 2012 have risen by 15% on the same period last year, as weak spending, fixed costs and poor store performances increase pressure on businesses.

According to research by Deloitte, 69 firms fell into administration during Q1 of 2012, in comparison with 60 in 2011. This also represented an increase of 64% on the previous quarter, when 42 retailers entered administration.

This statistic has been attributed to both the arrival of the quarterly rent day, as well as high numbers of retailers with too many marginal stores.

Paul Feechan, consumer business partner at Deloitte in the North East said: “The first quarter of 2012 is particularly significant given the high profile nature of the companies we have seen enter administration: Peacocks, Game, La Senza, Blacks and Past Times.

“The number of job losses that came as a result of these administrations was almost 10,000 out of the 22,000 employed by those companies. In contrast, Q1 2011 saw far lower levels of job losses.

“Overall, for 2011 and the first quarter of 2012 the largest 15 retail insolvencies had 2,800 stores and only 1,350 stores have survived; an attrition rate of 52%.”

In the recent ‘Store of the Future Report’, Deloitte also called on retailers to redefine their store proposition and address the changing needs of customers. It also suggested that some retailers may be forced to reduce their property portfolio by up to 40% to meet the changing demands of customers.

Mr Feechan added: “In order to remain competitive, some retailers will need to rethink their business models to be nimble and adaptable to changing consumer trends.

“A fast-changing retail environment will require certain businesses to reassess their store portfolios, not as a matter of choice, but in order to survive.”

Overall, the number of companies falling into administration, excluding retailers, in Q1 2012 saw a decline of 10%, from 497 in Q1 2011 to 447.

Neil Matthews, restructuring services director at Deloitte in the North East, added: “Whilst conditions undoubtedly remain tough, the year-on-year decline is a positive indicator and gives a glimmer of hope that some industries are potentially over the worst,”

This was posted in Bdaily's Members' News section by Ruth Mitchell .