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Retail insolvencies increase 15% in Q1 2012

Latest research into the retail landscape has revealed that the number of retailers falling into administration in the first quarter of this year increased by 15% to 69 compared with 60 in the same period last year.

GENERAL MERCHANDISE

Retail insolvencies increase 15% in Q1 2012

Retail administrations in Q1 2012 rose by 64% on the previous quarter, when 42 retailers entered administration, according to research by business advisory firm Deloitte.

Lee Manning, restructuring services partner at Deloitte, said: "The first quarter of 2012 is particularly significant given the high profile nature of the companies we have seen enter administration: Peacocks, Game, La Senza, Blacks and Past Times.  The number of job losses that came as a result of these administrations was almost 10,000 out of the 22,000 employed by those companies.  In contrast, Q1 2011 saw far lower levels of job losses.

"Overall, for 2011 and the first quarter of 2012 the largest 15 retail insolvencies had 2,800 stores and only 1,350 stores have survived; an attrition rate of 52%."

Manning said that while the quarterly rent day often set the timing for insolvencies, a significant trigger in a number of recent administrations was that some retailers had too many marginal stores where fixed costs and poor performance were a drag on the overall business.

Deloitte’s recent Store of the Future report has suggested that some retailers may have to reduce their property portfolios by up to 40% in the next five years and adapt to meet the changing demands of consumers.

Manning added: "In order to remain competitive, some retailers will need to rethink their business models to be nimble and adaptable to changing consumer trends. A fast-changing retail environment will require certain businesses to reassess their store portfolios, not as a matter of choice, but in order to survive."

Overall, the number of companies falling into administration, excluding retailers, in Q1 2012 saw a decline of 10%, from 497 in Q1 2011 to 447.  "Whilst conditions undoubtedly remain tough, the year-on-year decline is a positive indicator and gives a glimmer of hope that some industries are potentially over the worst," said Manning.

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