When it comes to shopping, Christmas seems to get earlier and earlier with each passing year. Yet with consumer confidence crumbling in recent months, there is a growing fear that Christmas may not come at all this time around, or at least not the bumper festivities many retailers had been hoping for to make up for the increasingly dismal trading they’ve experienced in the second half of 2011.
According to Tim Moore, senior economist at Markit Economics, "measures of household’s cash available to spend and their willingness to make major purchases were both even worse than at the peak of the recession". Retailers are clearly bracing themselves for the worst. According to a survey of the UK's leading retailers by public relations firm Kreab Gavin Anderson, more than a third expect Christmas takings to be down this year. And even though 60 per cent expect flat trading, a large chunk of these admit this is a best-case scenario. Pre-Xmas warnings from a raft of retailers including
But many retailers have been cautious in their purchasing in the build up to Christmas, to ensure they aren't left with too much stock to liquidate if customers don't turn up. "Most retailers will have been circumspect", says Lee Manning, retail restructuring specialist at professional services firm Deloitte. He also notes that most cash-strapped retailers will already have agreed monthly rental terms with their landlords, rather than the once dreaded quarter days. "All landlords are alive to the fact that tenants are in a difficult market, and that if they push them too hard they could be left with nothing," he says.
He believes that the issue most retailers now face is a store portfolio that's too big for their level of trading, and that the use of voluntary arrangements in restructuring means spectacular Woolworths-style collapses are now less likely. With the agreement of landlords, struggling retailers are able to shed the underperforming stores which drain cash to focus on a few profitable outlets.
But Mr Manning still anticipates an increase in retail insolvencies in the coming quarter compared with the last two years, a view supported by figures from the Centre for Retail Research, which show that there were 21 major retail bankruptcies in the first six months of 2011, versus 26 for all of 2010. "Businesses don't go bust because they have too much stock, but because they don't have enough customers", he says. "This critical selling period will be the last test for a number of retailers".
See also: Who's at risk?
visible-status-Standard story-url-retail_news_231111.xml
