HALF of major retailers in the UK face falling into administration by the end of the summer as they struggle to manage their cash flow during the coronavirus lockdown, a new report has suggested.
A study of 34 major non-food retailers in Britain found that five already had negative cash flow before the pandemic had even begun, relying on credit to fund any investment.
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Even if sales dropped 10 per cent during the lockdown period, more than two-thirds of retailers would fall into negative cashflow, according to the new report from global professional services firm Alvarez & Marsal and Retail Economics.
But the report suggests that sales are set to drop as much as 70 per cent – putting every retailer sampled into dangerous territory.
The retailers studied included Next, Card Factory, Shoe Zone, Mulberry, John Lewis and Dunelm.
The report suggested that even with government help, more than half of the retailers will run out of cash within six months.
Retailers covered in the analysis
These are the retailers the study looked at to assess the state of the UK high 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
- Mulberry
- N Brown Group
- Next
- Pets At Home
- Photo Me
- Quiz
- SCS
- Shoe Zone
- Stanley Gibbons Group
- Studio Retail Group
- Superdry
- Ted Baker
- Topps Tiles
- Travis Perkins
- United Carpets
- Watches of Switzerland
- WH Smiths
At the moment, retailers are being helped by government measures including a business rates holiday and the furlough scheme, which pays some of employees’ wages.
They are also being protected from eviction and are being offered other help to manage any loans they may have.
If the lockdown only lasts three months, most large retailers will be able to weather the storm, the report suggests.
But if it lasts through the summer, demands on retailers’ cash will intensify and they will have to seek alternative funding in order to pay things like rent and labour costs.
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Richard Fleming, managing director and head of restructuring, Europe, at Alvarez & Marsal, said government measures had 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 steps to address underlying operational issues while they still have the chance,” he added.
The report also said that the coronavirus crisis has resulted in more people buying things online which they would have previously bought in stores.
One third of consumers have switched to purchasing products online that they would have previously only purchased in shops, it said – something which it expects to continue even once the lockdown lifts.
A number of retailers have already suffered in the last few weeks, including Debenhams, which officially entered administration for the second time in 12 months last week.
It also emerged this week that Warehouse and Oasis are close to appointing accountancy firm Deloitte to handle an insolvency process.
And at the end of last month, Brighthouse and Carluccio’s went into administration, putting 4,500 jobs at risk.
