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Fifteen big chains face shutting shop

Fifteen national retailers are expected to go into administration in the next six months as the crisis in the retail sector deepens.

Denis Baker, chief executive of corporate health monitoring specialists Company Watch, warned: “There is a real risk that there will be at least as many failures as during the dark days of Christmas 2008, when 15 national retail chains filed for insolvency. The only question is about the timing.”

The next crunch point comes at the end of the month when shop rents are due.

The last rent day in June helped trigger collapses of TJ Hughes, Jane Norman, Focus DIY and Habitat.

This time, there may be fewer immediate failures as landlords, lenders, and suppliers give embattled retailers some leeway ahead of the busier Christmas trading period.

Baker said: “The problem is most likely to come in January and February when cash is high and inventory and debt is low, making the weaker retailers extremely vulnerable because creditor write offs would be at their lowest then. But with many consumers reluctant to incur credit card debt as austerity bites, if retail sales continue to fall away, then all bets will be off. And creditors may find their hands are forced as some retailers simply run out of cash and raise the white flag of commercial surrender before Christmas is over.”

The British Retail Consortium has revealed August like-for-like sales across the whole sector fell by 0.6 per cent year on year. It blamed poor consumer confidence, and high inflation.

Retailers that reported a fall in like-for-like sales last week, compared with the same period last year, included HMV, Alexon, Dixons, Argos and Homebase.

HMV’s shop sales crashed nearly 22 per cent. One retail restructuring expert said: “The sale of Waterstones has given HMV some breathing space, but the Christmas trading period will determine its future. If it has a bad Christmas, it has no future.”

Company Watch has calculated a 30 per cent deterioration over the past four months in the financial health of a group of six iconic retailers.

Source : Tracey Boles –

11 September 2011
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