Is UK Retail still in the doldrums?

Christmas is a critical time for most retailers and can be the difference between life and death for many high street stores. With the economy’s recovery in its early stages and purse strings remaining tight, Christmas 2014 was never expected to be all tinsel and mistletoe.

Christmas trading this year proved to be somewhat of a rollercoaster for many stores with Black Friday outpacing the week of trading in the run up to Christmas. Many retailers found that Black Friday distorted Christmas trading by creating a spike in sales as shoppers snapped up discounted goods early. That said, department stores John Lewis, Next and House of Fraser had a sparkling Christmas, with House of Fraser reporting one of its best Christmases to date.

Despite increased confidence in the market, retail remains an extremely challenging sector. The increased demand for online delivery, the warm autumn weather, the combination of Black Friday and Cyber Monday and the quarterly rent bills falling due on Christmas Day all added to the high street challenges with many retailers reporting difficulties over the Christmas period. Renowned high street names Debenhams and M&S were amongst some of the retailers not getting all they wished for from the Christmas period. Debenhams reported a disappointing Christmas performance and M&S announced that it had been a ‘difficult quarter in general merchandise’. It is apparent that Black Friday is here to stay and this will need to be factored in to the 2015 Christmas plan.

One of the first high street casualties in 2015 was the clothing retailer Bank that went into administration on 5th January, less than two months after it was sold to HMV owner Hilco Capital. Shortly following the collapse of Bank, USC, another clothing retailer, was put into administration for the second time prompted by a demand from Diesel, the fashion label, for unpaid debts. Sports Direct subsidiary Republic bought USC out of administration in a pre-pack sale in an attempt to allow the business to carry on trading.

To prove that these things come in three’s another clothing retailer, Austin Reed has proposed a company voluntary arrangement (CVA) which if approved by creditors will see 31 of its stores close. The CVA also proposes that rents are reduced across a further 66 of the Group’s stores across the UK. The business will receive a £3 million cash injection from its shareholders as part of the rescue plan advised upon by Squire Patton Boggs’ London office in a bid to help secure the future of the business. Creditors are due to vote on whether to accept the Group’s proposals on 5th February.

It appears that competition and online pressure in the retail market is continuing to grow and it will be interesting to see how retailers react to these demands over the course of 2015.

Next month Squire Patton Boggs are hosting a Retail Debate to discuss how multichannel retail is influencing both shopper and retailer behaviour. The debate will take place in the Leeds on 3rd February and in the London office on 10th February.