Store closures are slowing in the U.K., but that’s not the full story.
Despite some positive signs that the worst carnage is in the rearview mirror, the British landscape suffered notable if relatively less severe losses in 2021’s first six months. Fashion stores led the way with 1,063 first-half closures, while 120 department stores went dark and the furniture sector lost 135 shops, according to PwC, citing Local Data Company’s numbers.
“The shift to online has been the biggest factor in closures across retail and services, accelerated by consumer behaviors in response to Covid-19,” the report said. “The closure of fashion and department stores have been driven by big administrations in Q1, with chains acquired by online operators with no ambition to operate stores.”
Local Data Company’s research indicates that about 8,700 stores have closed this year so far, with foot traffic to high street and shopping centers plunging 40 percent. In fact, 3,600 high street stores have shut down this year. After taking into account new store openings, first-half net closures through the end of June totaled 5,251 for an average of nearly 50 stores a day, versus the 48-per-day average for all of 2020. PwC said in March, again citing Local Data Company numbers, that 17,532 stores closed last year, with 7,655 openings for a 2020 net store decline of 9,877.
Retailers got a bit of a reprieve this year when governments revised restrictive operating measures in line with improving coronavirus caseloads and vaccination rates. Pent-up demand converted into better-than-expected retail sales, as consumer sentiment rebounded to pre-pandemic levels, PwC said.
Store closure rates have slowed when compared with the 11,100 doors that shuttered in 2020 during the height of the Covid-19 pandemic and multiple U.K. lockdowns. But store closures could deteriorate in the second half of this year.
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“After an acceleration in store closures last year coupled with last-minute Christmas tier restrictions and lockdowns extending into 2021, we might have expected a higher number of store closures this year. Government support has proved to be a lifeline,” Lisa Hooker, leader of industry for consumer markets, PwC UK, said.
“However, the next six months will be make or break for many, particularly with the reinstatement of business rates, the winding-down of furlough and the need for agreement on rent arrears, as well as uncertainty for hospitality businesses around further lockdowns, vaccine passports and other operating restrictions,” Hooker added,
Consumers and store operators alike are swapping city centers for suburban or out-of-town locations, PwC noted, pointing to remote and hybrid working arrangements as a factor behind the shift.
Bankruptcies, too, are trailing 2020’s breakneck pace, another sign that the retail sector might be turning a corner.
Centre for Retail Research (CRR) data indicates that only 13 retailers have hit the skids during the January-through-June frame, affecting 1,687 stores and 24,775 employees. For 2020 as a while, 54 retail companies failed, dinging 5,214 stores and 109,407 employees, the center found.
JTF Mega Discount Warehouse, a membership discount chain, is among those failures, while Amanda Wakeley and Brooks Brothers’ UK Division also filed for administration.
Victoria’s Secret UK, which went into administration in June 2020, is in the process of liquidating its stores. Peacocks, the value chain formerly owned by Edinburgh Woollen Mill, was transferred to new owner Ango-Global Properties and is understood to be associated with PurePlay Retailing, CRR said. The changeover resulted in the closure of 223 stores and 2,370 jobs, leaving 200 stores in operation and 2,000 jobs intact. Pureplay has taken over 50 Bonmarché stores and 246 Edinburgh Woollen Mill and Ponden Home locations. Asos bought some of bankrupt Arcadia’s brands and BooHoo acquired some of Debenhams’ assets, but both left costly stores out of the equation.
Despite the fewer failures, CRR still expects 200,000 job losses in the retail sector, and possibly more bad news ahead. In a report that looked at job losses and store closures from January through June, CRR said high costs, low profitability and sales lost to online shopping have hurt retailers. What’s more, government restrictions plus changes in shopping behaviors have impacted “most businesses operating physical stores in high streets, shopping malls or neighbourhoods.” Even retailers that have seen sales rise have faced higher costs from complying with the new pandemic regulations to protect staff and shoppers.