It’s Panic Thursday!
... but the last minute rush may be too late for ailing stores
A LAST-minute Christmas shopping spree will begin today, but it may not be enough to save many struggling stores.
Dubbed ‘Panic Thursday’, the number of people rushing around high streets and shopping centres is expected to be up 60 per cent on a normal day.
With schools shut for the festive holiday, millions will be making a desperate bid to stock up at supermarkets and complete gift shopping – especially as many online companies have warned that delivery drivers are struggling to cope with the unprecedented number of orders.
Steve Richardson, of retail analysts Shopper Trak, said: ‘With fears that online orders will not arrive before Christmas Day, shoppers will step out from behind their screens and take to the high street to finish their gift buying. Panic Thursday marks the start of the steady build-up of in-store footfall as we head towards the big day.’
Many stores have been running sales promotions since the Black Friday spending spree in November. Savings of up to 80 per cent have been on offer from the likes of Debenhams and House Of Fraser, while chains such as Argos and Currys have also been heavily promoting deals.
High street stores have been increasingly squeezed by the rise of internet shopping, and strong Christmas takings are all that stand between many being forced to close down in the new year. One report warns there is a 22 per cent increase in the number of stores which are in ‘significant financial distress’ compared to a year ago.
Toys R Us already faces closing 100 outlets with more than 3,000 redundancies, while there are also questions about the future of Steinhoff, the South African parent company of UK firms Poundland, Harveys and Bensons For Beds, over an accounting scandal that has seen its chairman and chief executive resign.
Research by business recovery experts Begbies Traynor shows the number of retailers in ‘significant financial distress’ is 43,677 – a rise of 22 per cent on a year ago. Spokesman Julie Palmer said: ‘Although this week’s milder weather might very well encourage a few extra shoppers to leave the fireside for a day of last-minute spending, I’m afraid it’s probably too little, too late.’
She added: ‘With Christmas Day just around the corner, retailers have all but run out of time to turn around their ailing fortunes after a particularly disappointing few weeks of trading following Black Friday. The increasingly frantic promotional and discounting activity we are seeing this week is simply not having the same effect on consumers as it once did.
‘Shoppers are savvier and prepared to search for the best deals, having grown wise to gimmicks and discounts on offer in store, which many now realise may not be as good as they first appear.’
Estimates by Shopper Trak suggest shopper numbers will be up 60 per cent on a typical Thursday and 37 per cent higher than a usual Friday. Saturday is expected to be the busiest day of the year to date, with customer numbers up 63 per cent as 14 million people hit the shops to spend £1.4billion, according to research by Voucher Codes and the Centre For Retail Research.
Toys R Us was last night accused of funnelling £584m into an offshore tax haven as it teetered on the brink of collapse – putting 3,200 jobs at risk.
The ailing retailer, which could go into administration today, has been criticised for the write-off of a mystery £584.5m loan to a company in the British Virgin Islands, a territory commonly used by firms for tax avoidance purposes.
Tax experts have called for an investigation into the accounts, accusing Toys R Us of secrecy and tax dodging.
The firm, which saw losses of £673m in the year to January 28, has been struggling as it battles online shopping.
A make-or-break meeting with creditors today will decide whether to approve a rescue deal proposed by Toys R Us, or force it into administration.
Accounting professor Prem sikka, at Essex Business school, likened the lack of transparency to the management of retailer BHs, which collapsed last year leading to the loss of 11,000 jobs.
‘I think, frankly, there should be an investigation here. The UK’s accounting rules prevent companies like this from providing cash flow statements meaning that no one can see what is going on behind the scenes,’ he said.
‘Why on earth did they have all these subsidiaries based offshore? The straight answer is that it offers it a degree of secrecy and confidentiality. And there must be a tax angle or there would be no point in putting the money into the British Virgin Islands.’
Richard Murphy, a tax professor at London’s City University, suggested the loan could have been used to buy property as a way of avoiding stamp duty and capital gains tax.
‘Whatever they bought is now devalued because the company isn’t making money as its business model is fundamentally flawed,’ he said. ‘People don’t want to go to big out- of-town locations to buy toys, they want to use Amazon and so those giant warehouse stores used by Toys R Us are not worth a lot of money. The loan write-off proves that it was a bad investment decision.’
A gaping £30m black hole in Toys R Us’s retirement fund has also prompted concern. It has come under scrutiny from MPs after it emerged trustees of the pension scheme were not informed about the multi-million-pound loan write-off.
Labour MP Frank Field, the chairman of the Work and Pensions Committee, said: ‘As with BHs, the trustees and pensions regulator were kept entirely in the dark. The pension scheme is, at best, an inconvenient afterthought to self-interested corporate restructure. The puny regulatory system only kicks in once the damage is done.’ Toys R Us wants approval for a company voluntary agreement, so it can close 26 of its 105 stores, deliver savings – and give it a chance of survival. However, it needs the approval of The Pension Protection Fund, the pensions lifeboat for failing firms, which will not back the deal unless Toys R Us pays £9m into its retirement fund. The retailer says it cannot afford to do so.
Toys R Us did not comment.