Will retail insolvencies start the year - again?
"Retail insolvencies start the year" was one of Insolvency Blog's first posts of 2007.
It's hardly surprising to see retail administrations at this time of year - over-leveraged and under-performing retailers have minimum borrowings after the Christmas sales peak and secured creditors will naturally choose that point to stop the losses.
. . . constructive use of formal insolvency . . . can often add value when a business is saleable and the right restructuring team is brought in early enough.
Paul's comment on the retail sector was:
I think the consumer has the last word on who survives - if they wish for identikit high streets, or doughnut towns, or McDonalds bacon sandwiches, so be it.
History seems to be repeating itself. The Sunday Telegraph notes here this week that:
- Insolvency experts are on standby amid fears several high street retailers could collapse in January
- Consumers turn to sub-prime lenders as credit squeeze bites
- Footwear and clothing retailers have been particularly badly hit by the downturn in consumer confidence
But the way to address business stress is, as it was a year ago:
- take advice early
- ask a situational expert
- don't panic!
Can't believe that was a year ago!
I think the relatively strong (ie, not as bad as expected) Xmas sales figures were bolstered by the December cut in interest rates - a quick boost of financial amphetamines which preserved consumer confidence and masked greater problems in the economy.
However, if and when a $100 barrel of oil translates into more expensive Chinese imports, higher inflation figures, in turn higher interest rates, and in turn lower consumer confidence, then simplistically one would imagine the discretionary retailer will suffer.
Gazing into my murky crystal ball, my bet would also be that any retailer somehow tied to the fortunes of the housing market will struggle this year (say: furniture, DIY, estate agents, carpets) as fewer houses are purchases. If you don't buy a new house, you don't buy a new sofa quite so often.
Luckily for the UK economy though - whilst our retailers might go bust, at least its Chinese factories that will feel the pain, and not our own!