Tuesday 28 June 2011
Lots of retailers in the news. None with good news.
The recent scale of administrations is similar to the worst levels of the 2008 recession.
Habitat, Focus DIY, Moben/Dolphin, Jane Norman, have all recently folded up. Comet's owners are rumoured to be looking for a buyer.Clinton card's are trying to delist to avoid the media glare as it tries to find a solution to its problems. Mothercare/Game/HMV are downsizing, or moving out of town. Waterstone's saved only by a generous oligarch...
This is the reality behind all 2009/10's hot air about a double-dip. A double-dip is only a measurement. The reality is many chains got through the recession but took a battering and growth has been poor. Those who just survived can only hang on with lower profits, smaller margins for so long. Rates and wages have increased since the recession and cost prices have risen dramatically. Vat pushed up prices, took another slice and further damages profits.
There are many, many more companies, teetering that need a result, and soon, or they will just eventually be unable to continue. Its not just loans that are due. Its the annual maintenance bill, vehicle replacement, packaging replacement costs and a hundred other things. If profits are razor thin, then no reserve can be built up. Eventually, the money just runs out.
The next round of minimum wage increases will push another few over. And minimum wage increases, though a pain, aren't normally too onerous on companies as the increases are inflation-ish amounts.
The climate is actually incredibly benign for a recession, which helps. Rents are falling. Interest rates are minimal. And these recent collapses have probably ensured that they will stay low, whatever inflation does.