Q1 2012 retail administrations increase by 15% year-on-year
64% increase in administrations from previous quarter with larger companies now failing into administration
9 April 2012
The number of retailers falling into administration in the first quarter of this year increased by 15% to 69 compared with 60 in the same period last year, according to research by Deloitte, the business advisory firm. Retail administrations in Q1 2012 increased by 64% on the previous quarter, when 42 retailers entered administration.
Lee Manning, restructuring services partner at Deloitte, comments: “Whilst the quarterly rent day often sets the timing for the insolvency, a significant trigger in a number of recent administrations is that many retailers have too many marginal stores. As online retailing continues to grow whilst overall spending is weak, the fixed costs and poor performance of some stores drags on the overall business.
“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%.”
The evolving landscape of the retail sector was highlighted in Deloitte’s recent Store of the Future report, which described how retailers need to redefine their store proposition and address changing customer needs. The report suggests that some retailers may have to reduce their property portfolios by up to 40% in the next five years and adapt to meet the changing demands of consumers.
Manning adds: “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. “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,” said Manning.
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