The next few months are set to be crucial for retailers, experts have warned today, following news of the possible closure of up to 260 stores at Arcadia Group.
In its full-year results published yesterday, the owner of retailers including Topshop and Miss Selfridge, announced that profits before tax had dropped 38 per cent to £133.1 million, while like-for-like sales fell 1.8 per cent in the 52 weeks to August 27th 2011 and total sales were down 3.4 per cent.
Challenging economic conditions have affected many retailers across all sectors and Arcadia owner, Sir Philip Green, said that “these are very tough times” adding that, of the 450 or so store leases that are due to end in the next three years, between 250 and 260 are not expected to be renewed.
Economists and experts have long been cautious over the outlook for the industry, although recent retail sales figures from the Office for National Statistics were surprisingly positive.
Pre-Christmas offers and promotions have boosted sales, which rose 0.9 per cent year-on-year in October while trading increased 0.6 per cent compared to September.
However, Francis Coulson, President of insolvency specialists R3, warned that Arcadia‘s announcement could have a wider impact on the high street.
“Following last week‘s pick up in retail sales, the news of Arcadia‘s 38 per cent fall in annual profits brings us depressingly back down to earth. The group, which owns Burton, Dorothy Perkins and Miss Selfridge, is likely to be only one of many that is still struggling in the downturn.
“The next few months will be crucial for retailers who need to build up their reserves before the new year, as this is when consumers will curtail their spending once again.”
Employing more than 44,000 people and operating 2,507 stores, the group continues to eye further international expansion and remains committed to its multichannel development, as online sales grew 21 per cent over the year.
Stuart Wood, Executive Director of branding and design agency Fitch, feels that prioritising a multichannel presence is key to maintaining brand strength in the current economic environment.
“It would seem that the brands that are thriving (Topshop, Topman, Miss Selfridge) are those that provide a combination of consumer relevance and brand experience whilst being competitively priced,” he said.
“The brands that are struggling lack a clear point of difference and provide little by way of experience. In a world where you can buy a new outfit on your smartphone on the back of the bus, the only reason to visit the store is experience.
“Whether that experience is about first class service, curated product or a more holistic lifestyle approach, it must be brand and consumer centric.”
Wood agrees that this is a difficult time for retailers, pointing to recent figures which estimate that as much as 15 per cent of UK high street retail units are empty as further evidence of this.
“If retailers don‘t start to be more creative they will not only loose share of pocket but also, share of imagination. The dinosaurs of the British high street will die out and a new more agile beast will replace it.
“For consumers this could be good news. Better experiences, better products, keenly priced – sounds like a good reason to go shopping.”