By Laura McGuire
Less than two months into 2024 and six UK retailers have already gone bust, with a further two warning they may fall into trouble, as experts warn the market will “continue to see an uptick in insolvencies”.
According to figures from Centre of Retail Research, over 400 job roles have been impacted by retailers shutting up shop in light of the cost of living crisis and financial strain placed on businesses.
So far the most notable collapse has been Lloyds Pharmacy, which is set to leave behind over 1,000 empty stores.
Last March, its private equity owner Aurelius Group launched a strategic review of its entire UK store base following financial and operating troubles.
Just last week, it was reported that liquidators were appointed to the pharmacy chain with creditors set to lose out on approximately £255m.
This bombshell came amid warnings from fellow high street retailer Superdry that it was mulling a CVA after reporting widening losses.
Superdry, which has 98 stores in the UK, also later said it was in talks with parties over a possible takeover deal which would see the brand saved.
Retailers are facing a tough new year as high inflation and a squeeze on personal finances has slowed down consumer spending.
It was also reported in February that Ted Baker owner Authentic Brands was considering a CVA or mulling a major cost cutting plan which could see stores shut and jobs lost at the brand.
Speaking to City A.M, Rob Baxter, UK head of corporate finance and global head of KPMG’s consumer and retail M&A team, said he predicts there will “continue to be an uptick in insolvencies as the year progresses”.
“I would say that the retail sector has been restructuring itself for maybe 20 years,” Baxter said, noting the more than a decade-long push from physical retailers to ramp up their online presence.
“[It] looks like what we’re seeing is more consolidation within certain sectors and more clear distinction between the winners and losers in the sector,” he explained.
The pandemic kickstarted an uptick in mergers and acquisitions in the retail sector.
In 2021, Asos snapped up high street darling Topshop and other leading brands from Sir Philip Green’s Arcadia for £330m.
Fast fashion giant Boohoo also bought the website of embattled department store Debenhams for £50m.
Since then, the market has seen brands with healthy balance sheets such as Next and Frasers Group swoop in to save rivals.
In the last three years, Next has acquired Made.com, Joules, JoJo Maman Bebe and Cath Kidston to name a few. It has also built a 72 per cent stake in retailer Reiss and formed a joint venture with American lingerie brand Victoria Secret.
“If there’s an opportunity for M&A in 2024, it might be one of consolidation,” Baxter said.
While sector confidence in retail may be low, Baxter said rising consumer confidence and economic reports that inflation will edge closer to a normal rate of two per cent will help repair the market.
“I don’t think it’s going to be a year of massive spending sprees. But it feels more positive than last year,” he said.
