The high street's woes are a ultimately down to the consumer
Department store chain Beales has warned that administration could follow if it can't secure fresh investment and its CEO has criticised high rents and business rates, while landlords have been firing back at retailers
Beales is one of Britain’s is one of oldest department store chains, a business that began in Bournemouth in 1881 and now has 22 stores in provincial towns and cities up and down Britain.
Trouble is, history counts for nothing in today’s retail climate. When the chain announced that it was on the brink of falling over in the absence of a buyer or an investor, the natural reaction was to dial up a certain Queen song.
You can probably already hear that thumping baseline and Freddie Mercury intoning “another one bites the dust” in your head. If the ear worm is with you for the rest of the day, my apologies.
The reports of the retailer’s troubles dovetail with some research from Colliers International, a real estate adviser that’s been keeping an eye on Company Voluntary Arrangements (CVAs), a form of bankruptcy that’s proved quite popular with retailers.
They’ve been used as a means of addressing some of the problems Beales boss Tony Brown identified on the BBC’s Today programme: high rents and the need to close unprofitable stores on long leases to cope with a trading environment mired in an ice age.
Creditors, including landlords, are typically presented with a restructuring proposal that includes the closure of some stores together with reduced rents at those that remain. If a majority agree - 75 per cent is required - the minority has to lump it.
These tend to be a lot harder on smaller landlords, often in the sort of places that Beales calls home, than the big ones that dominate the prime locations in big cities. They are also highly controversial in the property businesses.
Colliers added fuel to that fire. It found that out of 23 retailers that underwent a CVA from 2016 onwards, 13 of them went on to fail. They ended up in administration with the CVA thus serving as little more than “sticking plaster” that delayed the inevitable.
The problem for landlords is that every time a client forces a rent reduction through a CVA, their other clients start queueing up to demand the same thing, some threatening CVAs of their own.
There is a more optimistic way of looking at Colliers’ figures. It is that ten businesses came out the other side.
That’s a considerable achievement in the current climate, all the more so given what’s causing it.
Property owners, and the businesses that serve them, complain about CVAs. Retailers bemoan high rents, business rates, the inaction of central and local government.
The root cause of both sides' problems, however, is the consumer. The trend of cash rich time poor shoppers abandoning bricks in favour of clicks shows no signs of slowing.
Clothes retailer Next proved to be a rare star of the current, grim, retail season, reporting sales ahead of expectations. Over the period from October 27 to December 28 it recorded a 5.3 per cent rise, which looks almost like witchcraft. Until you break it down by channel, that is. At stores, sales were down 3.9 per cent, online they were up 15.3 per cent.
A while ago, CEO Simon Wolfson openly speculated about a future for Next without any bricks. His customers are telling him he was right to do that.
Sadly there will be more Beales, and more CVAs, to come. It’s the consumer’s choice.