UK retailers close 20 stores a day

The analysis shows that financially troubled retailers have closed or plan to close around half of their stores - though supermarkets, convenience stores and cafes are bucking the trend.

The UK's multiple retailers closed 20 stores a day on average across the UK between January and the end of May this year, according to data compiled on behalf of PwC by the Local Data Company (LDC). The data also revealed that across multiple retailers in 300 town centres, clothes, shoe shops and jewellers have been amongst the hardest hit in 2011. Supermarkets, convenience stores and cafes have bucked the trend showing growth in the first half of the year.

PwC's latest retail insolvency statistics for Q2 2011, released today, have also revealed that there were 375 retail insolvencies this quarter, 9% more than the same time last year.

PwC research indicates that, since the start of the recession, financially troubled retailers have closed, or plan to close, on average half their store portfolios as the high street comes under increased pressure. PwC examined the announcements of eight high profile failed or struggling high street retailers and found that on average 51% of the total store portfolio have or could be closed.

'Retailers will continue to struggle'

Mike Jervis, PwC insolvency partner and retail specialist, commented: "Retailers will continue to struggle for the next six months and we will see high levels of financial distress among certain types of retailers such as clothes shops. The combination of rising inflation and dented consumer confidence has led to people increasingly trying to find the best deal online. This has made life difficult for store-dependent high street retailers who have seen a drop in sales and reduced footfall.

"Retailers cannot afford to bury their heads in the sand, and must think about surgery before the problem becomes terminal. They need to engage with their stakeholders early, especially banks, landlords, credit insurers and their staff. Through our work, we have seen a number of successful turnarounds involving the use of consensual arrangements and early engagement with banks, landlords and shareholders which have saved retail businesses."

Source: LDC

Previous PwC research (see notes to editor) has indicated that the picture has been made gloomier for high street retailers by the shift to online shopping. Our survey of over 1000 consumers revealed that internet shopping has moved from being used occasionally to becoming routine, with 14% of people now buying on the web more than once a week, compared to only 4% in 2007. Nearly one in five respondents say they are spending more than half of their disposable income online.

Consumers cautious

Mark Hudson, retail and consumer leader at PwC, said: "As consumer confidence about the future is heading towards historic lows, we are seeing a repeat of the buying behaviours we saw in the second half of 2008. Not only are consumers reining in their spending, they are also increasingly using the internet to find the best deals and often buy online.

"Given price inflation, this has had the double impact of volume declines and an acceleration in the growth of online - both of which hurt store economics. No wonder some retail specialists are feeling the heat, especially those in discretionary categories, those without an online offer or where it's tough to create differentiation.

"The next challenge is going to be planning sales and securing stock for Christmas - there are going to be some tough negotiations in the coming months."

Matthew Hopkinson, director of the Local Data Company, concluded: "Analysis of these top multiples shows how they now require fewer stores in fewer locations but with larger floorplates. The rise of multi channel retailing adds to this requirement. The negative trend seen here is, however, offset by the supermarkets and their move into convenience formats along with the new opportunities presented to charity shops, pawnbrokers and betting shops."

Notes:

<1>1. Opening and Closures of Multiple Retailers by Region across the UK

*Derived from 300 retail town centres
Source: LDC

2. A survey of 1000 consumers formed the basis of a PwC report launched in April 2011 - "Pick 'n' Mix - meeting the demands of the new multi-channel shopper"