Brexit Britain

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High Street Blues

IWTO Retail Forum Chair Peter Ackroyd reports from Brexit Britain 

Headlines in the UK over the last few weeks reveal a clothing retail world in unprecedented turmoil as the ‘worst on record’ June sales figures are published in the financial media. Admittedly, this has to be seen in the context of an unusually buoyant June 2018.

Adding credence to the industry Casandras in London however are the now frequent reports on line and in print that show the once-acclaimed fashion retail names on London’s Oxford Street and Regent Street seeking relief from critical debt burden through the implementation of a Customer Voluntary Arrangement (CVA), the new way in UK to attempt to restructure a struggling business. Arcadia, the fashion retail group owned by Sir Philip Green had only limited success with their recent much publicised attempt at a CVA, when landlords scored a minor victory in restricting its scope. Needless to say, Sir Philip is fighting back.

This has nevertheless emboldened high street landlords, but has it discouraged other retailers from seeking similar CVA relief from crippling rents and business taxes? Will Jack Wills, the rather smart, but cash starved clothing chain, popular with wealthy students and graduates, seek the CVA route? There are not too many options open for a company with annual sales of £139.5m and pre tax losses (year on January 2018) running at a disturbing £129.3m.

Superdry, just around the corner on Regent Street where the founder, Julian Dunkerton, has recently (rather controversially) regained control, pre-tax losses are at around £85m. On Oxford Street, even the great barometer of middle UK, John Lewis Partnership (JLP) is under pressure, as profits fall -45%.

Analysts say this must be put into context and are anxious to point out that the travails at JLP do not in any way amount to an inability to pay rent and rates, a predicament that caused the demise of LK Bennett, Hardy Amies, Maplin and currently stalks several more rickety retailers waiting in the wings. As JLP’s Oxford Street neighbours, Debenhams and House of Fraser struggle to stay afloat, Selfridges, a little further up the road, continues to thrive through shrewd investment in product, emphasis on provenance, customer service and offering a totally different retail environment.

Nearby on Bond Street, where luxury brands continue to vie for prime location, commercial life remains perennially impervious to recession. Across the road, Savile Row and its cheaper acolytes on Jermyn St continue to deny the suit the death so many have erroneously predicted coming its way over the years.

According to UK retail guru Richard Hyman, there is, quite simply, too much shopping space, too many stores and too many websites chasing demand at a time when costs for business are constantly rising and demand is clearly not.

Marks and Spencer, whose flagship Oxford Street store is just above Selfridges, has recently seen its share of the UK clothing market drop yet again from 10.6% in 2004 to an estimated 7% this year. Whilst still the UK’s biggest seller of clothing, NEXT and Primark are waiting patiently in the wings to claim the title. “M&S always seem to get it wrong!” sighed a retail analyst, trying to explain why the high-profile Jill McDonald, less than two years into the job of M&S clothing supremo had been fired.

If Brexit is one of the key causes of consumer uncertainty in the British middle market and the sole cause of an ever weakening GB Pound, no such considerations seem to be troubling Burberry that saw retail sales rise by +4% in the first quarter of 2019, following a similar rise in 2018, exceeding expectations and seen as a measured vote of confidence in Riccardo Tisci, who replaced Christopher Bailey last year as Creative Director.

It is the relatively strong performance of global luxury brands and the continued popularity of made to measure tailoring that gave a number of better and finer quality exhibitors at Milano Unica some cause for cautious optimism for autumn winter 2020/21.
 

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