Tuesday, 17 January 2012

Too hard, Too long

The initial casualties of the recession amongst retailers were the elderly and the already weak and sick. Woolworths had been in the hospice for about a decade. Zavvi had no money. Some of the weak ones went into CVA , escaped their unpayable leases, wrote off their taxes and just started again.
The slashing of interest rates, the realisation of the creditors that a deal was better than administration and the landlord's slowing coming to understand that the shoe was on the other foot, meant that many of the retailers that could, and indeed should, have collapsed, did not.

There was always a good chance the storm could be ridden out providing cash flow could be maintained,costs cut and most importantly, that the recession was not too long lasting.

It does look like the recession has gone on too long. Staff levels were already at a historic low in 2007. So were cost prices. Energy costs were manageable. The biggies, rent and rates, were artificially high and they came down, but there wasn't much else to cut.

A quick look over 2011/2 shows some of those same administration survivors going into administration again. No company can continue loss making for ever. Amidst all the annual, gushing 'best Christmas ever' headlines that the British retail consortium were putting out daily between 20/12 & 1/1/12 there was their report on administrations.

The total number of retailers in England and Wales falling into administration in 2011 increased by 11% from 165 in 2010 to 183...and the very worrying .. Administrations for the fourth quarter of 2011 were up more than 25 per cent compared with the same period a year earlier.

Unhelpfully business rates rise another 5.5%. {unfortunately the value of domestic/business properties was calculated at the absolubte property boom aug 2007 peak.} That may well prove to be the final nail for many businesses. Outside of those having a good war, John Lewis, Greggs, Poundland, Matalan, QD stores, profits have been down for two+ years now. There are no reserves. Any further sales decline just tips stores into closure. The retail analysts consensus is that many more administrations waiting to happen in the first quarter.

I can't say I've seen anything that would contradict that.

Failures so far in 2012

  • Peacocks - some talk of a late deal.In administration.
  • BonMarche.- Same:There are 550 stores and 9,600 employees.
  • La Senza, 146 stores, 2,600 employees.
  • Past Times 100 stores and perhaps 1000 employees.
  • Blacks Leisure, 98 Blacks stores and 208 Milletts shops. There are 3,885 employees.

Failures in 2011

  • Hawkin's Bazaar 400 staff and 120 stores.
  • D2 Jeans 47 stores, of which 19 were immediately shut with 200 employees dismissed, and there are 300 more employees in the remaining stores and head office.
  • Barratts 191 stores, 391 concessions, and employs 3,840 people.
  • Cooks Bakery, 8 stores and 62 employees. It had 120 bakers' and coffee shops five year ago. You might remeber them as Three Cooks.
  • Best Buy, the Carphone-Warehouse controlled electrical chain began closing its 11 stores last week. It had hoped to have 200 stores by now.
  • Alexon, the fashion chain, went into pre-pack administration at the end of September. The group owns 990 outlets trading as Ann Harvey, Kaliko, Dash and Eastex employing 2,700 staff. Sun European bought the company out of administration saving the group, but at the costof shareholders (loss £4 mn), suppliers and HMRC (lost £12 mn).
  • Walmsley, the 60-store furniture retailer. 25 stores have been bought.
  • Floors-2-Go, the floor covering firm collapsed for the second time. 53 of 88 stores were closed with the loss of 200 jobs,.
  • Lombok, the furniture chain, went into administration in August for the second time in two years. Nine of its stores closed immediately, leaving three.
  • TJ Hughes, 57 stores and 4,000 employees.6 stores saved.
  • Jane Norman,90 outlets, 1,600 jobs
  • Habitat 33 remaining stores. 900 staff. . 3 stores remain.
  • Homeform, Moben and Dolphin, Sharps and Kitchens Direct. Sharps bougt. I think the rest went.
  • Life & Style, 91-store fashion lifestyle chain . Collapsed for the 3rd time. 62 stores bought up.
  • Haldanes, the grocery retailer 26 stores,- 600 staff. I
  • Focus DIY chain, 3,919 employees and 170 stores
  • HiHo Jewellers 14 stores and an online business - 55 employees
  • Oddbins,
  • Alworths, the successor to Woolworths, went into administration at the end of March. Stores sold to poundstretchers.
  • Easy Living Furniture 20 outlets- 150 people
  • The Officers Club into administration again 900 people in 102 stores, 46 of which (400 staff) have now gone to Blue Inc.
  • Henleys, 18 stores and dismissing 200 employees.
  • Bennets, the Norwich-based electricals retailer with 14 branches and 300 employees
  • Auto Windscreens 1,200 employees, 68 fitting centres, 550 mobile units, a call centre and distribution depot
  • JJB Sports, 45 problem stores then closing a second tranche of 50 stores. Needs a fantastic january to survive.
  • British Bookshops and Stationers, a 51-store 'discount' stationery/books chain with 300 employees in the South was the first major retail casualty of the 2011, going into receivership in Jan 2011. W H Smith bought 22 BBS stores.


Anonymous said...

The small retailer has been under great pressure for many years, they have had to join groups to survive, those groups will start coming under pressure, in the early 80's there was the growth of cheap shops now they coming under pressure from big multiple cheap shops, basically the bigger you are, the less your buying costs per unit are. As the recession gets deeper the next round of bigger outfits will start getting into trouble. A lot of firms started to buy from the far east, but they continued to charge UK prices for the goods. When I was in business the number of people that said would not buy goods made in China was large, now they would hard put to buy anything made in the UK

Another anonnymouse said...

Depressing. What's Vince going to do about it?

Budgie said...

When I visit the "cheap" shops I get depressed - the quality is so bad it is mostly not worth the trouble of owning what they sell.

For the more expensive shops I agree with Anon 8:24am: UK prices for cheap far East goods. £70 for trainers made in Vietnam for £2?

Having worked for a UK manufacturer of a throw away consumer item I know what the mark ups are. We bought the raw materials, manufactured, packed, distributed for 20p what retailed at 99p (or more in some cases).

I have less sympathy for shops than I do for banks.

dearieme said...

Let's face the music: now that people use shops as display counters and then buy over the internet, there may be trouble ahead......

Bill Quango MP said...

Anon: Quite right. Economies of scale.
Plus by spreading the geography, spread the risk. But when recession is Europe wide, not much can be done.
*note Mothercare's poor UK figures are boosted by their far eastern ones.
Very risky operating abroad and even the best of UK retailers fail. But there is a current demand for them

Jan said...

It's a necessary evil. Retail is far too big a sector and there is still a lot of cheap tat around. Retail is a victim of it's own success.

People generally have far too much "stuff" and throw too much away. No-one seems to value any of it any more. My parents and grandparents generations used to recycle everything and saved up for everything too. I remember we used to take glass bottles back for the few pence back on the bottle etc.

It's difficult to see what will take the place of all the lost retail jobs though.

andrew said...

having spent a lot of dinner last night (trying to) explain to stepdaughter the upside of ltd liability when her dad knows someone who lives next to the bloke who owns peacocks and he still has 2 bentleys...
people will still buy stuff.
if they do not go to shops to buy stuff, they will buy online and have it delivered.

one thing that is clear is that retail sites that are not a destination in themselves are overvalued.
bond st rents may rise but mylocalshop st rents will fall
we all know property is overpriced.

Bill Quango MP said...

Another anonnymouse: VInce? Put a mansion tax on probably.

Budgie. But it has always been so. And in the West until recently we have enjoyed 20 years of almost no inflation in goods. The quality has deteriorated, for sure. And terribly so in the last 3 years as commodity prices have risen.
On Ebay the 1990's McDonald's happy meal toys sell for a couple of quid each. Today's thin plastic poor component ones will be lucky to survive the journey home.

dearieme: It certainly isn't helping. But data shows 75%+ of sales are still over the counter.

I'd like to dig down into those numbers a bit though. I'd like to see the figures by sector. I'm sure in the DV and Cd market, books, holidays etc, sales on line are much higher, whilst fresh food, plants, stationary etc, must be much lower.

BlackRaven said...

if people are prepared to buy clothes online, then apart from immediate convenience i can't see what sector is safe.

Bill Quango MP said...

Jan: We didn't value because items were valueless. A kettle costs £5 to buy. you can't replace the components for £5. And why even try?
however..on a related subject to Budgie's point, my deLonghi, £65, ultra crappy kettle, made from the thinnest plastic and shortest screws, had the lid break.
Just the pull up plastic handle. The plastic threads on the attachment have broken.
3 options:
1. leave the over tight lid wedged in place and fill up through the too narrow spout, and don't think about it again.
2. Buy a replacement lid for about £20.
3. Buy a new model. This one is almost two years old.

Well, just a few years ago it would be option 3 without hesitation.
But austerity Britain has made option 2 the choice. And the lid came and was the wrong one, but I managed to swap the parts I needed. Felt like a real dad.

I'm sure item's value will continue to rise as people are unable to just buy new.

Andrew: Had a look at some Peacocks and Bon Marche shops yesterday. They didn't look like they were about to go bust. Lots of work going on.

I'm so surprised that the government allows CV's as they are. Officer's club has been in and out of administration many times. Usually the old owner's take over within 5 minutes and if they have played it properly only the taxman and the banks lose money. The suppliers are paid, the landlords are paid the staff are paid. Business carries on..until the next time.

Anonymous said...

Shall we have sweep for who is next - make a change from the old QT quiz?

Anonymous said...

It's not really suprising that a retail sector which expanded on the back of the Mentalist's long and unsutainable boom has hit the rocks. We've seen it before but this time it's hugely more pronounced and the pain will last longer. Watch out for more evidence of pain in the leisure/pub/restuarant sector as unemployment/reduced spending power bites.
Just for info. according to the British Retail Consortium 11% of the total UK workforce were directly employed in the retail industry in 2003.In 2004 a figure of 2.7 million was mentioned by the British Council of Shopping Centres.

Budgie said...

BQ: "my deLonghi, £65, ultra crappy kettle ...". Just so. It was probably made in the same factory in China where the Argos £8-95 kettle was, next to all the other factories making nasty consumer goods for the West. And next to the prison labour camp where inmates who don't make the production targets in the factories routinely get shot between midnight and 6:00 am.

Bill Quango MP said...

Anon 1:06..-Not dissing the world famous QT quiz? . must put that up later. Don't really fancy a next to go bust game though. Bit morbid..however Dixon's group reduced to reporting 'we're not doing as badly as our rivals' in their trading statement. -7% on December.
And December figures were really, really soft. Retailers faced the easiest set of Christmas figures for decades after last years snow and recession.
BQ Industries was very disappointed to be -5% on December.I'm glad we didn't trash the margin though. Some of those reporting good sales figures are going to have nothing to show for it all except a bigger VAT bill.

Anon {2}. Its quite staggering just looking at those numbers on the list. So many lost jobs. And that's just the big boys. There are loads of small traders going bust taking 5-10 people with them every day. I saw at least 10, non Christmas, non temporary shops with 'final reductions-out of business sale' signs in just one town yesterday.

Budgie: I really don't like that kettle.Its very stylish, looks like a chrome and lacquer designer one. but its a knock off. A few years ago it would at least have had decent finishing. This hasn't.
I looked up reviews on web sites and I'm not alone. 1 star.
Brought from John Lewis too!
Glad that you taxpayers paid for it. I'd be annoyed if i had to pay for it myself.

Anonymous said...

"if people are prepared to buy clothes online"
I also initially thought that, but it is no different from the catologue days. People just order 2 or 3 sizes or styles and send them back. the catologues are just online now. Same business model.

Laban said...

Of those stores, how many were (relatively) debt-free concerns closing because they were losing money, and how many are afloat (or not) on a sea of debt ?

I'm still trying to work out how Blacks of Greenock, smallish maker of excellent, British made tents and mountain gear 40-odd years back, turned into a behemoth that sells the same stuff as everyone else ...

Laban said...

smallish anecdote - we unload some stuff through Freecycle - have done for years. Noticed lately that desirable adverts (a nearly new double bed) get answered within minutes - someone's got mobile internet permanently up.

Our last 2 giveways were collected by

a) the bed - couple in newish Merc estate who said they'd just moved back from the Seychelles and needed to furnish !

b) guy in pickup crammed with items - obviously doing the rounds.

It was a great idea but it's being gamed by professionals now ...

Timbo614 said...

@Laban: being gamed by professionals now...

At car boot sales and the like this has been going on for years.. one local school which holds a "table top" sale every few months charges £5.00 entry before 9:00AM (50p thereafter). It's to take advantage of the dealers who want first pick.

@BQ: on retail generally, in my repair business things have been looking up as you would expect :) We are pretty busy. I have in fact now scrapped(nearly) most of the crappy stock that sat there for ages and turned the display area into a smart waiting/checking-in area. The remainder has display but is actually to hold stock for the on-line parts side.
So there are ways, even when you are tiny.

Jan said...

Bill I'm quite annoyed we taxpayers paid £65 for such a duff kettle and then another £20 for a replacement lid! Go to Wilkinsons or Argos next time for a cheaper one. My kettle/toaster deal was half that price and still going strong after 3 years of heavy use...or are you only allowed to go to John Lewis in which case we taxpayers are being diddled. More expensive is not necessarily better value.

Re Freecycle I had a video recorder which went straight away to an East European woman who wanted it "for her 10 year old son" about 3 years ago when I moved house. Good luck to the dealers...there must be worse ways of making a living. It's still a good scheme as big heavy things get taken away for free and have a new lease of life.

Bill Quango MP said...

Laban/Jan - Lots of people speak highly of freecycle. I always expected that someone is making a killing. but as i normally pay some local chap £10 a time to take heavy items like TVs and beds to the dump, do i really care if someone is getting free stock?

I sold a bugaboo on ebay. i didn't want the hassle of posting but guy kept emailinh. He had a contract with DHL. ould collect. All very easy. In the end, as he was offering more, i did it.
This guy must have been polishing and reselling for more.

Did it matter to me? I just wanted the damn thing gone from the hallway. Quango jr hadn't sat in the damn thing for at least 2 years.

Timbo - BQ industries just bought in some 'sale/clearance' stock. All our genuine clearance, rubbish stock is pretty much gone.