Sectors: Retail

Rescue and recovery specialist Begbies Traynor has revealed that conditions have continued to worsen during the past three months within the beleaguered retail sector.

Its Red Flag Alert early-warning system for the December 2008 to February 2009 period shows that retail sector constituents with critical problems increased by an average of 22 per cent month-on-month (January to February), while actual insolvencies showed an average 19 per cent month-on-month increase.

A further fear for sector watchers is that the recent quarterly rent payment – on Wednesday 25 March – could push many floundering players into insolvency, with rent being such a significant cost.

The fact that this rental hit came hot on the heels of what is traditionally the weakest quarter for retailers (January to March), being after the Christmas rush, and that the key Easter trading period is late this year (Easter Sunday is 12 April versus 23 March last year), will do nothing to help matters.

Opining on the prevailing mood, Begbies Traynor partner Nick Hood says ‘prospects for the sector remain tough’, with sterling weakness forcing up costs and negative job news damaging consumer confidence.

Furthermore, he argues that ‘the continuing unwillingness of landlords to consider either lower rents or turnover rents’ to help struggling tenants is ‘understandable but unhelpful’.

His prognosis? ‘We are still likely to see insolvencies of well-known retail chains in the high single digits over the next three months.’