No end in sight to the misery of high-street retail chains
Another week and more tales of despair from the high street.
This week French Connection has announced it is to shut shops, Evans Cycles is seeking a buyer and Moss Bros issued a profit warning.
Orla Kiely, a fashion brand worn by the Duchess of Cambridge, has closed its stores after falling into administration.
The retail and wholesale side of the brand, famed for its colourful patterns, ceased trading on Monday, resulting in the closures of three outlets.
However, the licensing arm of the business will continue trading, meaning Orla Kiely branded product collections for the likes of John Lewis and Partners and Very.co.uk will not be affected.
A new report has revealved 51,000 high-street businesses closed in the past year.
Revealing the figures following a written Commons question, Communities Minister Jake Berry said: “In the last 12 months, 51,504 businesses on UK high streets closed.
“Over the same period, 42,166 new business units opened.
“This is based on Local Data Company data, which looks at openings and closures of individual units rather than businesses.” That means a net loss of 9,338. Bike shop chain Evans Cycles has been put up for sale. Advisers are understood to be in talks with a number of potential buyers for the business, which has more than 60 stores in the UK, including one unit in Cardiff.
Possible new owners are understood to include private equity groups and trade buyers.
PwC, which is handling the sale, has asked for final bids by the end of next week.
Concern about the group’s precarious financial position came to light in early September when it was reported that the retailer was in talks with its lenders, seeking a multi-million-pound cash injection to continue trading.
It is thought to need at least £10m to keep up with obligations over the coming months.
Evans Cycles is owned by private equity firm ECI Partners, which bought the chain for £80m in 2015.
Meanwhile, fashion retailer French Connection insisted this week it was on track to return to annual profit despite revealing widening half-year losses and an £800,000 hit from the House of Fraser collapse.
The group reported pre-tax losses of £15.1m for the six months to July 31 against losses of £5.9m a year earlier, following writedowns including the House of Fraser impact and store leases.
On an underlying basis, halfyear pre-tax losses narrowed to £5.5m from £5.9m a year ago.
The group said like-for-like sales tumbled 7% across the UK and Europe for the six months to July 31 in “difficult trading conditions”.
But its half-year performance was boosted by a robust showing from its wholesale arm, which saw revenues rise 6.2%, or 8.9% with currency movements stripped out.
Licensing income remained flat at £2.6m.
Stephen Marks, chairman and chief executive of French Connection, said the group would still swing out of the red over the full year in spite of a “challenging” outlook for retail.
He said: “There is no doubt that progress has not been helped by the trading conditions in which we operate in the UK, although we can take great confidence from the performance of the wholesale business and the stability of the licence income.”
“We remain on target to return the business to profitability this year and we will be doing everything we can to ensure that happens,” he added.
The group outlined plans for a further retrenchment from a difficult high street, with plans to close eight retail stores over the full financial year, having already shut two in the first half.
It added that the “continued deterioration of trading conditions on the UK high street” meant it was reviewing leases on a number of other loss-making stores.
French now has 103 own-managed stores and a further 204 operated under franchise or licence.
It sold the Toast brand, which was started in Carmarthenshire, in April, making £11.7m in proceeds.
Also in fashion retail, Moss Bros has warned over profits after hot summer weather and the World Cup “distraction” pushed the menswear retailer to a half-year loss.
Earnings show the retailer swung to a pre-tax loss of £1.7m for the six months to July 28, having posted a profit of £3.9m in the same period last year.
The retailer said it was knocked by £1.2m in store impairments, in light of a “small number of underperforming stores”, and took a further £800,000 hit amid “reorganisation and employee-related costs”.
It also suffered a 3.3% drop in total group revenue excluding VAT to £64.5m, while like-for-like retail sales, including e-commerce, were down 6.9%.
Moss Bros shares plunged more than 20% in morning trading yesterday.
Moss Bros chief executive Brian Brick said trading performance over the period “was one of the most volatile for many years” – a result he blamed on extreme weather conditions and the World Cup football tournament.
He said: “We initially saw sales performance recover well following our previously highlighted early-season stock shortages, and sales were generally ahead of expectation.
“This came to an abrupt end when high-street footfall dropped dramatically, impacted by the protracted and unplanned period of extremely hot weather and the widespread distraction of England’s success in the World Cup.
“Although all retailers were impacted in some way, menswear was specifically impacted negatively by the combination and longevity of these two external factors.”
Mr Brick said those effects were compounded by distressed discounting by competitors, as Moss Bros held firm on pricing.
Customer footfall was down by an average of 7% year on year, while its worst-affected stores saw a 14% drop.
Moss Bros estimates that it was negatively affected by around £2.7m of retail store sales, which would have delivered around £1.4m in gross profit.
It said online shopping and distribution via third-party marketplaces were less affected and “continued to achieve positive momentum”.
Mr Brick went on to say that “early response” to the autumn and winter ranges has been “strong”, but that Moss Bros “remain acutely aware that the highly competitive retail landscape is set to continue, alongside an unpredictable economic backdrop and increasing cost headwinds”.
He added: “We have reviewed our expectations for the second half of the year despite having a number of key trading weeks still ahead of us, and whilst short-term cost-cutting would make us more certain of mitigating the footfall-related gross profit shortfall and therefore hitting the market’s expectations, we feel it would be detrimental to the longterm health of the business.
“As such, we have taken the decision to continue to invest and to deliver profit lower than expectations.”
Mike Cherry, chairman of the Federation of Small Businesses, said: “Spiralling business rates and everincreasing rents are clobbering highstreet firms, forcing some to shut up shop in the face of an unsustainable future.
“With bank branch closures, reduced access to cash and expensive town-centre parking adding to the mix, it’s no surprise small retailers continue to report the lowest confidence level of any sector.
“In fact, our research shows four in 10 firms expect their performance to get worse over the next couple of months.”
Calling for a £1,000 discount for shops, pubs, eateries and other businesses on the high street to ease the crisis, Mr Cherry added: “Something needs to be done.
“Government and local authorities must come together to find real solutions to these issues.”
The turmoil on the high street has seen Carpetright closing 92 stores, Toys R Us and Maplin collapsing into administration on the same day in February, Mothercare announcing sweeping store closures, while House of Fraser was plunged into administration until it was rescued by Mike Ashley’s Sports Direct. However, the fate of many House of Fraser stores remains in the balance as Mr Ashley is currently negotiating with the landlords.