UK retailers are facing increased financial stress this year as the big supermarkets fight a price war that has forced the rest of the high street to slash prices and squeeze profit margins.
As retailers prepare for the quarterly rent day on Christmas Day, traditionally the time when banks call in the administrators, more than 24,000 retailers are suffering from significant financial distress, according to research by the advisory firm Begbies Traynor.
The number is up 54% compared with the same time a year ago, with food and clothing retailers among the worst hit.
Begbies Traynor said as many as 135 businesses were in critical condition as retailers chased sales in the final days of Christmas.
The accountancy firm did not name specific retailers but those in difficulty are thought to include Austin Reed, the tailoring firm, which is understood to be close to appointing Deloitte to work on a rescue deal that may include a company voluntary arrangement allowing it to sell off unprofitable stores.
Julie Palmer, a retail expert at Begbies Traynor, said: “Black Friday was lauded as the biggest day of the retail sales this year but it seems the only real winners were the largest online retailers and the big-brand high street chains with the biggest discounts.”
Administrators said it was unlikely that 2014 would see a repeat of the mass retail failures of early 2013 when HMV, Blockbuster and Jessops followed the collapse of Comet in late 2012. One said: “I don’t see another uptick coming. But some small retailers could struggle. When the likes of Next warns that its profits will be hit by the warm autumn, weaker players must be struggling with cash.”
Alan Bloom, Global Head of Restructuring at accountants EY, said: “The final ‘quarter day’ of 2014, which wraps up the trading year, is expected to end on a brighter note than in previous years. There are always winners and losers in the retail game, and inevitably some high street shops will fold. But the combination of increased consumer confidence and a very successful ‘Black Friday’ which propped up recent sales figures, has meant that retailers have done better this year than many might have expected.”
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