Keeping your eye on the ball – by Philip King FCICM
11 January 2018
It’s looking like a bleak time for the retail sector. Figures compiled by Deloitte show that 118 retailers became insolvent in 2017 compared to 92 in 2016, an increase of 28%. Large retailers with ten or more stores fared proportionately worse with an increase of 55%, from 11 in 2016 to 17 in 2017. Visa/HIS Markit recent figures show that retail spending in December fell by an annualised one per cent. The British Retail Consortium has reported that, over the three months to December 2017, in-store sales of non-food items declined 4.4% on a like-for-like basis, the deepest since their records began in December 2012.
The UK business of Toys R Us avoided administration at the eleventh hour just before Christmas (see Credit Management December 2017). Poundland is being rocked by an accounting scandal in South Africa, Debenhams has issued a steep profits warning, Mothercare has issued a profit warning stating that the slowdown it’s experiencing is a trend rather than a blip. Elsewhere, House of Fraser has contacted some of its landlords asking them for rent reductions, and New Look is struggling with falling sales and a huge debt burden.
Theo Paphitis, whose group includes Rymans and Robert Dyas, has said he is worried and that Christmas was hard for retailers. He has been quoted as saying “In all my years I have never seen it so hard and unforgiving, where the shopper will punish you if you take your eye off the ball.”
The flurry of Christmas trading results will continue over the next few days and weeks but I expect more bad news. I don’t believe retail will be the only sector that disappoints either.
Credit management includes determining who to do business with, and on what terms. Credit professionals will have their mettle tested as this year unfolds and I’m proud that the CICM will be here to help them with more resources and support than ever.