Cost-of-living crisis to result in further retail failures

Cost-of-living crisis

It comes after an increase in retail collapses towards the end of 2022, with high profile insolvencies such as Joules and

The cost-of-living crisis is set to result in further retail failures over the next year with larger firms positioned to snap up stricken competitors, according to retail experts.

It comes after an increase in retail collapses towards the end of 2022, with high profile insolvencies such as Joules and

Credit insurance specialists at Atradius said there was a jump in claims across retailers and consumer firms over the year, in a signal of growing uncertainty which resulted in others launching re-financings or broad restructurings.

Erin Brookes, managing director and head of retail for Europe at Alvarez & Marsal, said deals by Next to buy the Joules and brands from administration could point towards further consolidation as smaller firms come under pressure from rising costs.

She told the PA news agency: There are retailers and brands which came out of the pandemic with much weaker balance sheets and have now been hit by lower consumer sentiment, alongside any supply disruption and cost inflation.

These still have something to offer, so some of the larger, more robust groups will definitely see opportunities around, she said.

That is likely to involve picking up businesses in rescue deals or even just opportunities, from other retailers or investment firms, to buy firms at what they feel is a low price given how much shares have dropped, she said.

Over the past year, online retail giants Boohoo and Asos have both seen their shares slide over 70% amid a slowdown in demand following the reopening of stores and pressure on budgets.

Brookes added that this Christmas could be invaluable to many retailers as they head into a potential challenging start to 2023, when there is expected to be confirmation of a recession.

She said: This Christmas is super critical as a lot of retail businesses have been suppressed throughout the year.

If you have a good Christmas, then it gives them a solid footing, but if some under pressure retailers report weaker-than-expected trade, then they might be considering their next options, she said.

Atradius said pressure on the retail sector led to a 71% jump in payment claims compared with 2021, which was only worse in the construction sector.

James Burgess, head of commercial at Atradius UK, said ‘we’ve seen an increase in overdues and insolvencies’ in the retail sector as firms were also impacted by the end of government support schemes.

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