43,000 retailers report “significant” financial distress after tough first quarter

936
April

Nearly 43,000 retailers ended the first quarter of 2018 in financial distress as declining footfall, poor weather and weak consumer spending battered margins.

According to new research from insolvency specialist Begbies Traynor, the number of firms experiencing “significant” financial distress at the end of March rose 21 per cent year-on-year, representing nearly 10,000 more businesses.

Of these, general retailers were the hardest hit with those reporting distress rising 25 per cent to 30,668, as discretionary spending hit its lowest level since 2012.

Food and drug retailers, who are generally less dependent on consumer spending and weather conditions for sales, also saw numbers reporting distress up 11 per cent to 12,290 over the last 12 months.

“Almost weekly we hear news of another major retailer that is struggling – from the recent administrations of Maplin and Toy ’R’ Us, to Carpetright’s closure of a quarter of its stores and the recent CVAs of New Look and Select – indicating that even the most established brands are failing to entice customers through their doors,” Begbies Traynor partner Julie Palmer said.

“With competition on the high street fiercer than ever and sales volumes expected to be flat at best this year, those retailers with sophisticated delivery options and a strong multi-channel offering are likely to come out on top.

“At the same time, any businesses who are still playing catch-up on the technology front, or have failed to grow their customer base or invest in modernising legacy systems, are only going to lag further behind the pack.

“However, there is a glimmer of hope on the horizon for the UK’s consumer-facing industries who have weathered the storm thus far. With inflation falling back, lower unemployment and real wage growth finally returning, we should hopefully see households start spending again as the weather improves.”

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