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Comment: Pre-packs can be an honourable last resort

Kirsty McGregor

At this time of year the news section of Drapers can be a gloomy read, as tales of administrations, store closures and job losses abound.

The first quarter of 2016 looks set to be particularly punishing in the wake of stagnating store sales and heavy discounting on the high street in the run-up to Christmas.

This week, it emerged that the UK licence holder for Ben Sherman has been sold as part of a pre-pack administration, resulting in the closure of three stores. It follows a string of administrations last month, starting with womenswear etailer Atterley and culminating with the collapse of out-of-town footwear chain Brantano UK on January 21.

In between, Blue Inc rid itself of a third of its stores by putting its subsidiary into administration.

Administrations – and pre-packs in particular – sit uncomfortably with many people. They smack of secretive plotting on the part of badly run companies to shed stores and offload debts, leaving creditors high and dry. And at times the system has been abused. Over the past few years there have been some high-profile fashion and footwear retail administrations. Some had profitable owners and, I’d wager, were actually relatively healthy, viable businesses.

However, the system can help those in genuine need to get back on to a sound footing. In many cases, through no fault of its own, a company is faced with insurmountable issues – perhaps a large supplier has gone bust or it is tied into unsustainable leases – and administration is the only way to resolve them. Pre-packs can be used to protect the core business and save jobs – more than 200 at Ben Sherman – allowing the company to move forwards with a better structure. In today’s tough climate, they have become a necessary tool to keep many a retailer going.

The question in these cases is how did it get this far? While Ben Sherman remains notably quiet on that point, Blue Inc and Brantano have blamed difficult trading conditions caused by the unseasonably mild autumn and the shift to online shopping respectively.

As insolvency experts point out, retailers without a strong multichannel offer – like Brantano – are particularly at risk from such external factors. Online is key, as is tightening your buy and doing more of it in season.

Discounting also plays a part. Our survey of 56 fashion indies across the UK shows this is their biggest concern this year. One issued a stark prediction that, if high street discounting carries on unchecked, independent fashion retailing will cease to exist within 15 years.

But there are glimmers of light. Most surveyed expect sales for 2015 to be up on 2014, and anticipate further growth in 2016. One owner pointed out that discounting just made it even more important to select unique brands that give a point of difference to the high street – which is what independent retailing is all about anyway.

 

 

 

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