Member Article

44% of stores survive retail insolvencies

44% of stricken high street stores were preserved through the administration process, research from insolvency trade body R3 shows.

Following the high-profile demise of several well-known retailers, the insolvency body found that 47% of jobs and 44% of stores had been preserved through the insolvency process.

The findings come from analysis of data relating to more than 20 retail chains which collapsed during 2011 and 2012, but does not include the collapse of chains such as HMV, Blockbuster and Jessops.

Steve Ross, chair of R3 in the north east and a partner in the Restructuring department of the Sunderland office of accountancy firm RSM Tenon, says: “The recent complete disappearance of Comet took us back to the collapse of Woolworths in 2008, but while obviously very traumatic for everyone involved, many retail collapses are not this cataclysmic, and significant parts of retail businesses are surviving the administration process.

“We’re still in a period where the High Street is having to re-define itself, and 2012 saw an extensive period of stores portfolios being shed to fit a more workable business model.

“This process could reach a natural conclusion at some point next year, although even allowing for all the bad news we’ve had since the start of 2013, I would expect a few more retail insolvencies following on from the final rent quarter day of the year on Christmas Day.”

Steve went on to explained that retailers rental portfolios were increasingly focussed towards fewer high quality, higher footfall locations, in contrast to more stores spread over lower rent locations with lower footfall.

He added: “This is a strategy that is only affordable for certain retailers with free cash to compromise their portfolios and pay off landlords, whilst others need to wait for the expiry of less desirable leases over time or, if insolvency looms, deal with a restructure of leases through a Company Voluntary Arrangement.

“Landlords will have to offer greater flexibility than the olden days of locking in businesses into onerous, long-term leases. Consumers are forcing retailers to make some stark choices, and in some cases, it will be modernise or disappear from the high street entirely.”

This was posted in Bdaily's Members' News section by Tom Keighley .