Getting the high street through the slump

The first five months of 2011 haven’t been kind to the nation’s retailers. The UK’s multiple retailers closed 20 stores a day on average across the UK between January and the end of May this year, according to data compiled on behalf of PwC by the Local Data Company (LDC).

Having a presence in the nation’s high streets is vital for most retailers, so what can you do to protect your company’s real estate portfolio and keep your stores profitable?

Who’s been affected?

LDC’s data revealed that across multiple retailers in 300 town centres, clothes, shoe shops and jewellers have been amongst the hardest hit in 2011. On the flip side, supermarkets, convenience stores and cafes have all bucked the trend and have shown growth in the first half of the year.

Risers

Fallers

Convenience food stores

 Clothes and shoe shops

Supermarkets

 Bookshops

Cafes

 Jewellers

Cafes

 Jewellers

Pawnbrokers

 Mobile phone shops

Take-away food outlets

 Music shops

Bookmakers

 Pubs/nightclubs

Source: LDC

Our latest retail insolvency statistics for Q2 2011, released on 8 July 2011, have also revealed that there were 375 retail insolvencies this quarter, 9% more than the same time last year.

Our research indicates that, since the start of the recession, financially troubled retailers have closed, or plan to close, on average half of their store portfolios as the high street comes under increased pressure.

We examined the announcements of eight high profile failed or struggling high street retailers and found that, on average, 51% of the total store portfolio have or could be closed. That’s a statistic that will raise plenty of questions for property managers at UK-based retailers.

Planning for the future

So what will the next six months bring for the retail sector? Mike Jervis, PwC insolvency partner and retail specialist, commented:

“Retailers will continue to struggle for the next six months and we’ll see high levels of financial distress among certain types of retailers such as clothes shops.

The combination of rising inflation and dented consumer confidence has led to people increasingly trying to find the best deal online. This has made life difficult for store-dependent high street retailers who have seen a drop in sales and reduced footfall.

“Retailers can’t afford to bury their heads in the sand, and must think about surgery before the problem becomes terminal. They need to engage with their stakeholders early, especially banks, landlords, credit insurers and their staff.

Through our work, we’ve seen a number of successful turnarounds involving the use of consensual arrangements and early engagement with banks, landlords and shareholders which have saved retail businesses.”

If you’d like to find out more about how to make the most of your retail property portfolio, you can contact Mark Batten from our Business Recovery Services team on 020 780 45635 or Simon Hardwick from PwC Legal on 020 721 23266.