Latest retailers news is bad, but not a catastrophe - yet

New data shows the extent of the damage the retail sector has suffered in the past 12 months.


Annual report for retailers is bad, but not catastrophic

Ann Summers

 

The Local Data Company (LDC) have published their eagerly awaited retail and leisure market trends report for 2020

 

The report pulls together the total number of stores opening and closing with lots of other data sources, giving a comprehensive account of the performance of physical retail properties in the UK. 

 

The hot take is that it’s bad but it could be worse. 

 

Underlining the findings in our own year of lockdowns report the research showed that over 11,000 locations closed their doors for the final time in 2020, making it one of the most difficult trading years for physical retailers. 

 

This figure includes 9,877 branches of various chain brands and 1,442 independent retailers. 

 

The news could have been even more negative with trends pointing to nearly 15,000 outlets being vacated but the various government support measures and limits on creditors’ actions including the suspension of winding up petitions and a moratorium on company evictions helped depress the figures at time of publication. 

 

The true impact may not yet be totally apparent as many outlets surveyed had temporarily closed due to lockdown and were not officially classified as being closed although in all likelihood they may never return when restrictions are gradually lifted, such as the eight locations John Lewis recently announced would not be reopening.

 

Outlets that had the steepest declines in their numbers were primarily fashion and clothing stores including Debenhams and members of the Arcadia group such as Topshop and Miss Selfridge along with bookmakers, estate agents and mobile phone shops. 

 


2020 is the worst year for retail closures – ever

 


 

Other notable findings included:

 

  • Shopping centres were the most negatively affected out of all retail locations losing 5.4% of their previously occupied units within the 12 month period surveyed or 6,984 which accounted for 62% of the total number of shop closures in 2020.

 

  • City centre locations had the highest number of vacancies, increasing by 2.5% in 2020 to 16.1%. This was mainly due to the lack of commuters and tourists due to the various imposed restrictions and the cancellation of regular attractions such as concerts, shows or sporting events that would otherwise attract more footfall.

 

Finally, they also highlighted the unique challenges facing landlords of larger department stores. 

 


 

The devil’s in the detail for retail landlords

 


 

Citing their previous work, they found that between January 2017 and December 2019, only 24% of landlords had found new occupiers for large stores with no capital investment required. 

 

Another 30% of former department stores saw some structural changes either being split into smaller units or being demolished, new, smaller property built in its place. 

 

Lucy Stainton, Head of Retail at LDC said: “The report shows a marked increase in the structural decline across the physical retail and leisure markets but we would also argue that we aren’t yet close to seeing the full impact of the Covid-19 pandemic. 

 

“What remains to be seen are the consequences of government support ending, effectively ‘defrosting’ a significant portion of the market which has been frozen in time since the onset of the pandemic. 

 

“With this in mind, we would expect to see the state of play in terms of vacancy rates and net change worsening over the course of 2021 and 2022 before levelling out.

 


 

“Hope is not a strategy” – James Cameron

 


 

While it’s certainly been a rocky 12 months for retail and leisure businesses, you could forgive them for being excited with the end of lockdown on the horizon and the idea that they could be welcoming people back through their doors once more. 

 

But the lesson of 2020 is that things rarely work out exactly as predicted and the underlying message of both our and LDC’s research is that things are likely to get worse for retail businesses before they start to get better.

 

We would love for economic activity to begin to return to normal from April and for businesses to be flying by the start of Summer but there are no guarantees. 

 

In fact, if there’s a delay to the vaccination program, further outbreaks or mutations of Covid-19 or other negative events then this will have a negative impact on the ability of companies to reopen and recover. 

 

This is all before factoring in the effects of the end of the various government economic support schemes and the reimposition of creditor recovery tools and other items such as the return of wrongful trading responsibility and company evictions which will happen at the end of June. 

 

All in all, this makes today the perfect time to take a quick breath and really understand where your business stands and how it could cope if trading conditions don’t improve in the immediate or short term. 

 

You can get in touch with us anytime you like to arrange a free initial consultation with a member of our professional, experienced team.

 

We’ll discuss where your business is at financially, what issues and difficulties you’re facing and what you can do – right now – to begin to tackle these. 

 

So even if things don’t start with a bang, you’ll be strong enough to take advantage when they do.

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