Retail: Retailers plunge into administration
FOOTWEAR giant Barratts and DVD and games rental chain Blockbuster have both plunged into administration this week but according to experts, it is immediately after Christmas that we will get an idea of how retailers are really fairing.
Yorkshire’s Barratts operates from 75 stores and 23 concessions across the UK and Ireland employing 1,035 staff. Philip Duffy and David Whitehouse, of insolvency firm Duff & Phelps, were appointed joint administrators of Barratts Shoes on November 8 and said they are reviewing the company’s financial position. Blockbuster has appointed Moorfields Corporate Recovery as its administrator, putting 2,000 jobs at risk.
Prew Lumley, property partner in the Leeds office of law firm Squire Sanders, said there is increased polarity and while good businesses are seeing an upturn and are starting to thrive, poor businesses will continue to suffer.
She said: “Most will push through to Christmas now and the banks will allow them to find a way to keep trading. If Christmas doesn’t work for them, then it’ll be the December quarter date’s rent demands that could trigger a series of new insolvencies in January.”
She added that zombie businesses are “still happening” and there remains a lot of hidden debt that the banks do not yet want to crystallise.
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Jim Whitaker, partner at Baker Tilly, said he doesn’t expect this January to be as bloody as last year.
“A lot of names have gone and that does free up the existing ones who benefit from capacity in the marketplace. The market has been allowed to adjust,” he said.
Christine Elliott, chief executive of the Institute for Turnaround, said that while there is overcapacity in the market, there are still segments of the business that could have a future, as is the case with Jessops and HMV.
She said: “It’s a sad fact that over the next five or so years as much as 30% of the current high street is potentially vulnerable to failure.
“The ‘Comet effect’, which is an example of a botched turnaround, not the real thing, is having a serious knock on effect, the most worrying of which is to spook suppliers. Blockbuster is another example of this.”
Cathy Barnes, professor of retail innovation at Leeds Metropolitan University, said she believes there is hope for those companies that went into administration.
“Ultimately they are great brands and people bought into the brand. The issue is the business model that goes behind that. Some are about price – different products are more sensitive – but it is usually about the full deal, the experience of the purchase and after sales and how much people pay for the knowhow,” she said.
Phoenix insolvencies – people putting their own company into administration and immediately buying it back as a means to renegotiate terms and drop failing stores – are a result of the realisation by retailers that they do not need to cover every town and city in the country.
Rules currently state that if a business is placed into administration immediately following rent quarter day, then it can continue to use the property for up to three months without paying any rent.
