Retail insolvencies as the credit crunch hits the high street
We reported in our earlier blog 'Retail Insolvency News', that the New Year is a time when retail insolvencies tend to come to the fore.
Some British retailers, hit by poor Christmas trading, may struggle to pay their December rent bills, forcing them into insolvency or a debt restructuring in the New Year. Experts are predicting that the most likely to run into trouble are 'big ticket' retailers selling discretionary products.
So noted Credit Today recently. As one of those whose view they sought I think there are systemic risks and that big-ticket, discretionary-spend retailers are in the front line.
But so far 2008's prominent retail insolvencies have been in shoes (Stead & Simpson and Dolcis), books (The Works) and fashion (Elvi and Base Menswear).
The common thread is undistinguished chains at the low end of the middle market being most at risk, with the credit crunch affecting future levels of retail spending and spending on non-essential delayable purchases. Differentiation and a nose for fickle customer demand remain the key factors for survival.
The Financial Times observes (here) that the tally of retail failures is lower than it might have been. Restructuring takes longer because of the more complex stakeholder structures found now compared to 5 years ago, and some of the weaker players saw the New Year's problems coming. Together these factors encouraged some retailers to start taking advice and acting early enough to avoid administration.
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