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British Retail Balance Sheets Brace for Lockdown’s Worst

U.K. Prime Minister Boris Johnson on Monday said stores selling non-essential goods may be able to reopen on April 12 at the earliest, and that will mean more financial pressure for retailers.

Retailers have been closed since Jan. 4 amid the spread of a highly contagious Covid-19 variant. He said data will determine the reopening day, which will depend on vaccine rollouts and whether infections can be curtailed. That means retailers will be fine-tuning where they can cut operational costs to offset losses from the ongoing pandemic.

However, retail data firm Springboard says the anticipated reopening of shuttered stores and outdoor hospitality businesses is expected to drive a 47.9 percent surge in footfall across the U.K.

“As we approach the 12-month mark since the start of the pandemic in the UK, lockdown fatigue is at its height and the increases in footfall over the last five weeks have indicated the pent up demand for a return to normality,” Diane Wehrle, insights director at Springboard, said Wednesday. “We know from when non-essential retail reopened at the end of Lockdowns 1 in June and 2 in December that footfall will rise sharply and we anticipate this will be more prominent than ever before” with the expected April uptick.

Meanwhile, Frasers on Tuesday said that it expects the ongoing restrictions to materially affect its financial performance. “Given the length of this current lockdowns, potential systemic changes to consumer behavior and the risk of further restrictions in [the] future, we believe this non-cash impairment could be in excess of 100 million pounds ($141.1 million).” This negative impact would compound what it previously reported late last year.

Mike Ashley, the founder of Sports Direct who also controls Frasers Group, called last year for lease terms to be transitioned from fixed monthly amounts to a percentage of sales that reflect the current economic reality. Retailers, including Frasers, had reportedly been granted rent reductions in 2020 due to the temporary store closures, as well as rent-free periods in certain instances. And just last month, Frasers Group decided to shut Jenners, the 183-year-old Scottish department store in Edinburgh effective May 3, following a dispute with the site’s landlord. About 200 jobs will be eliminated due to the closure. There’s a chance more store closures could be on the horizon for Frasers Group.

U.K.’s Sunday Times reported on Sunday that The John Lewis Partnership is also eyeing the closure of additional stores, depending on how negotiations go with landlords. John Lewis closed two department stores last year, one in Birmingham and the other at Watford, along with travel hubs at Heathrow and St. Pancras. It also received approval from the Westminster City Council to reduce its square footage at the Oxford Street store and convert the extra area to office space.

And Primark’s parent Associated British Foods plc last month said that losses through the end of the fiscal half year will escalate as lockdowns shutter stores. For ABF’s financial half ending Feb. 27, the company projected that losses could reach at least 1.05 billion ($1.43 billion) for Primark, which has famously resisted selling its cheap and chic wares online and has missed out on the pandemic-fueled e-commerce boom.

Separately, Giorgio Presca, the CEO of footwear firm Clarks, has abruptly resigned in what appears to be a management shakeup. In addition to Presca, other senior members of the management team, including chief commercial officer Massimo Barzaghi and chief people officer Difna Blarney, have also left the company. Clarks last year entered into a company voluntary agreement that saw Hong Kong-based LionRock Capital acquire a majority stake in the ailing shoe maker. Former Guess CEO Victor Herrero, a non-executive director on the Clarks board, is set to become chairman and CEO.

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