Half of retailers face administration by end of summer due to coronavirus lockout

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HALF the major retailers in the UK are facing the downfall of the administration at the end of the summer as they struggle to manage their cash flow during the coronavirus lockout, according to a new report.

A study of 34 large non-food retailers in Britain found that five of them already had negative cash flows before the pandemic even started, relying on credit to finance any investment.

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    Retailers could be in trouble if the foreclosure continues, new report says3
Retailers could be in trouble if the foreclosure continues, new report saysCredits: Getty Images – Getty

The news comes as Britain has been warned of wage cuts and up to two million job losses caused by the coronavirus lockout.

Treasury forecasters fear the economy will experience its worst crisis ever.

Unemployment could climb to 3.4 million and the deficit could reach £ 218 billion this year.

The figures, produced by the Office for Budget Responsibility, predict the worst collapse in GDP in a single quarter since the records began in 1908.

The International Monetary Fund has also warned that the world economy will suffer its deepest plunge since the Great Depression of the 1930s.

    Buyers walk past closed stores as UK foreclosure continues3
Buyers walk past closed stores as UK foreclosure continuesCredit: Reuters
    Main street forced to close as coronavirus crisis sets in

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Main street forced to close as coronavirus crisis sets inCredit: Reuters

The main street has already started to feel the pinch.

Retailer report found that even if sales fell 10% during the lockout period, more than two-thirds of retailers would fall into negative cash flow, according to new report from global professional services firm Alvarez & Marsal and Retail Economics.

But this suggests that sales are expected to drop by as much as 70%, which would put each sampled retailer in dangerous territory.

The retailers studied were Next, Card Factory, Shoe Zone, Mulberry, John Lewis and Dunelm.

A number of retailers have already suffered in recent weeks, including Debenhams, which officially took office for the second time in 12 months last week.

And it also appeared this week that Warehouse and Oasis are about to appoint the accounting firm Deloitte to manage an insolvency process.

The report suggests that even with government assistance, more than half of the retailers will run out of money within six months.

Retailers covered by the analysis

These are the retailers the study examined to assess the condition of the British street

  • AO.com
  • ASOS
  • B&M
  • Boohoo
  • Burberry
  • Card factory
  • DFS
  • Dixons Carphone
  • Dunelm
  • Fraser Group
  • French connection
  • Games workshop
  • Halfords
  • Howdens
  • JD Sports
  • John lewis
  • Kingfisher Group
  • Moss Bros Group
  • Blackberry
  • N Brown Group
  • next
  • Pets at home
  • Picture me
  • Quiz
  • SCS
  • Shoe area
  • Stanley Gibbons Group
  • Retail Studio Group
  • Very dry
  • Ted baker
  • Topps tiles
  • Travis Perkins
  • Plain carpet
  • Swiss Watches
  • WH Smiths

Currently, retailers are helped by government measures, including a corporate rate holiday and the holiday plan, which pays part of employees’ wages.

They are also protected against eviction and are offered other assistance in managing any loans they may have.

If the foreclosure only lasts three months, most large retailers will be able to weather the storm, the report suggests.

But if it lasts all summer, the retailers’ demand for cash will intensify and they will have to seek alternative financing to pay for things like rent and labor costs.

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Richard Fleming, managing director and chief restructuring officer, Europe, at Alvarez & Marsal, said government measures have so far spared many brands from immediate collapse.

“The next few weeks will be critical.

“Retailers need to ask themselves the tough questions and take action to resolve the underlying operational issues while they still have the opportunity,” he added.

Retailers who may disappear from the main street

These retailers have all revealed problems in the past few weeks

  • Debenhams entered administration earlier this month to continue operations, but will close 39 stores
  • Oasis and Warehouse said this week that they were on the verge of administration
  • Shoe shop Office went on sale
  • Laura Ashley announced it took office last month
  • Headlight fell under administration at the end of March
  • Cath Kidston went on sale to save it from collapse, and directors should also be appointed

The future also looks bleak for small businesses.

One in ten small businesses plans to close or sell, the Federation of Small Businesses warns, while one in five plans to downsize.

The Alvarez & Marsal and Retail Economics report also said that the coronavirus crisis has prompted more people to buy things online than they would have previously bought in stores.

A third of consumers have switched to buying products online that they would have previously only bought in stores, he said – which he hopes will continue even after the lockout is lifted.

Some retailers are working on how to operate during locking.

Fashion retailer Next reopened its website this week, two weeks after it was closed due to fears of coronavirus.

But others are struggling.

At the end of last month, Brighthouse and Carluccio’s entered the administration, putting 4,500 jobs at risk.

Austria begins lifting coronavirus lockout with non-essential stores opening for the first time in four weeks



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