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ReSolve Capital


Posted: 29 May, 2018

The recent announcement by Mothercare of plans to reduce its store portfolio by closing 50 outlets with the potential loss of 800 jobs make it the latest casualty on a long-suffering UK High Street. This year has already seen the collapse of Toys R Us and Maplin and major store closures by New Look and Carpetright.

Mothercare will now try to launch a company voluntary arrangement (CVA), a form of insolvency, under which they ask landlords and other creditors to help reduce their rent and credit overheads. Poundworld and House of Fraser are also planning to close stores using CVA procedures in the coming weeks.

High street visits declined 3.3% in April, according to the BRC-Springboard monthly tracker, which also highlighted nearly one in ten town centre shops are lying empty. The drop in footfall came on the back of an even more disastrous performance in March, when shopper numbers declined by 6%. Taken together there has been an unprecedented 4.8% drop over the two months – a bigger decline than was recorded in the same months of 2009 when the UK was deep in recession.

It seems many issues are facing the survival of the UK High Street, not the least of which is the continued increase in online sales and changing consumer spending behaviour. This coupled with ever increasing staffing costs due to increases in the minimum wage, profit margins squeezed by currency fluctuations, increasing business rates and rents, and even recent extreme bad weather, are all having a serious negative impact.

Those retailers succeeding despite the challenges are those that have stayed relevant and most are embracing a multi-channel strategy, recognising the need to be present when and where their target customers need them, offering goods both competitively priced and attractively displayed. Creating experiences that give customers more control and convenient ways to shop is ever more important whilst ensuring the customer experience is seamless across all touch points and channels.

However, Primark is also bucking all the trends as it does not sell online but nevertheless reported that sales rose 3% at established UK stores in the six months to 3rd March 2018. Benefiting from the “athleisure” trend and a shift towards more casual footwear in everyday life, sports fashion and outdoor wear group JD Sports also rose above the retail gloom as it reported a 33% rise in sales, suggesting that the High Street may not be dead after all.

For those retailers facing challenges our advice is always that early action is the key to avoiding or surviving financial difficulties. The difference between businesses that survive and thrive and those that fail is how well they manage difficulties.

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