More than 1,300 stores have closed in the first quarter of 2019 as a “direct consequence” of CVAs, store downsizing and administrations first announced last year, according to the Local Data Company (LDC).
The closure of as many as 1,358 stores, balanced by 849 openings – a net loss of 509 stores – comes as a result, says the LDC, of CVAs (company voluntary arrangement), store downsizings and administrations that were first announced in 2018. In 2018, the LDC figures show, a net 2,481 stores closed from Great Britain’s top 500 high streets, after 3,372 stores opened and 5,833 closed. That’s around double the net loss of 1,772 stores in 2017.
Among the retailers to take the CVA route in 2018 were fashion retailers such as New Look, furniture stores such as Carpetright, and nursery retailers such as Mothercare. Mothercare, for example, said earlier this month that it had closed 30 of its stores in the first three months of 2019 in order to complete its UK store closure programme ahead of schedule. It now has 80 stores, whereas a year ago it had 137. Mothercare’s said its move represented a ‘right sizing’ of its estate. This comes in the light of the fact that shoppers are generally making more of their purchases online.
Currently there are reports that Monsoon Accessorize may soon join those retailers using a CVA approach to right size their own store estates, while 2019 retailers to take this route are reported to include the Arcadia group and Paperchase.
The LDC study, carried out with PwC, found that fashion retailers, with a net loss of 269 stores, were among the most likely to have reduced their store numbers in 2018, followed by value retailers (-129), electricals shops (-110), entertainment and games retailers (-98) and mobile phone shops (-93). The study also found that banks were the single largest fallers in 2019 - down by a net 291.
Commenting, Zelf Hussain, retail restructuring partner PwC, said: “Several national chains weathered company voluntary arrangements or administrations as retailers toiled in the touch climate of 2018. Retail companies looking to survive let alone flourish in 2019 face an uphill battle.
“We have already seen several casualties in 2019 and there will undoubtedly be more, most likely in all categories except for groceries. Those retailers who will give themselves the best chance of survival must focus on having the relevant proposition and the investments needed to deliver this proposition; the optimal mix of channels and business portfolio; flexible leases.
“Additionally, we believe that CVAs are not the answer in isolation. Companies need solutions that fully address customer needs, represent sustainable cost savings and, if needed new money investment to bridge the lag between the cost of a restructuring and long-term performance improvements.”
PwC consumer markets leader Lisa Hooker said that the figures showed 2018 was a “turbulent” year for retailers, with a number of high profile store closures and as footfall continued to decline on the high street as the effect of online shopping, subdued spending and increasing costs all hit. She pointed to a reduction in openings that was accelerating the trend towards more net closures. “In categories as diverse as fashion and financial services, new entrants are able to gain share by launching online - enabled by technology and consumer adoption of mobile and ecommerce –rather than be saddled with the costs and risks of opening on the high street,” she said.
“The high street of the future will be a more diverse space, not solely dependent on stores. The analysis reflects this with the net growth of gyms and sports clubs, ice cream parlours and cake shops, in addition to initiatives to bring more shared office spaces and homes into what were traditionally shopping areas. However, it’s clear that the rate of openings is not currently enough to offset the closure of traditional retailers and services, so some tough decisions will need to be taken in the next few years.”
Lucy Stainton, head of retail and strategic partnerships at the Local Data Company, said: “A key trend from this latest analysis is the increased loss in leisure units across the top 500 towns. We identified the start of this decline in H2 last year and sadly this has worsened due to an incredibly competitive marketplace and rising operating costs. We anticipate further losses in the leisure sector as brands which fail to entice customers to spend across multiple trading periods -breakfast, lunch and evening- close stores for good.
“Also key to note is that the two regions that were previously less susceptible to market challenges, Greater London and the South East, are now the two that have been hit the hardest by store closures.
“However, there are still green shoots breathing life into this sector with brands trialing new grab-and-go concepts. It will be increasingly important for leisure operators to be agile to keep their offer relevant. Bricks and mortar has a strong future- but not as we know it. Stores and shopping destinations will continue evolving to better serve consumer demand, integrating as part of an online channel.”
Image: InternetRetailing Media/Paul Skeldon