”It’s not about making a profit any more, but surviving,” retailers have told Drapers after prime minister Boris Johnson demanded “drastic action” to combat the spread of the Covid-19 coronavirus this week.
High street footfall was already suffering when the government issued guidance on Monday advising against all non-essential social interaction and large-scale gatherings, and increased requirements for people to self-isolate.
Springboard reported high street footfall was down 31.2% year on year for the week to 14 March, hit by the virus outbreak.
“It’s not about making a profit any more but surviving through a set of circumstances,” said the managing director of one high street retailer. “To pay my staff I’ve got to be extremely considered about my ability to generate cash and the cash I spend.
“We’re looking at our trading hours and we’ve worked out store by store what’s a viable level of turnover. Once we get below that, it would make sense for us to just close the store. We are reviewing all of our payments going out to landlords, suppliers and the government. The ability to do anything consensual has evaporated. We’ll challenge the quarterly rents in advance and break it down into smaller amounts paid more often.”
Laura Ashley became the first retailer to collapse under the strain of coronavirus. It filed notice to appoint advisory firm PwC as administrator on Tuesday after failing to secure an emergency funding lifeline amid coronavirus trading concerns.
Will Wright, head of regional restructuring at KPMG, told Drapers more are likely to follow: “There is likely to be a significant rise in insolvencies, but it all depends on how long this goes on for.
“For the businesses that haven’t got real financial fire power, it is going to be about short-term crisis cash management and how you can navigate the cashflow to a point where you can avoid being wound up by your creditors in the meantime.”
Debenhams has already turned to landlords for a rent holiday. It asked for a five-month break starting immediately as it battles with coronavirus disruption.
Chief financial officer of Primark owner Associated British Foods John Bason told Drapers the retailer “can’t mitigate [against coronavirus losses]” and “will have a profit shortfall”. Primark announced last week that the closure of its stores across Europe could lead to a loss of £190m in sales over the coming month and the remainder of its store portfolio had been in like-for-like sales decline for the last two weeks. However, the retailer’s Chinese manufacturing operations have largely reopened and supply shortages “are now expected to be minimal”.
New Look CEO Nigel Oddy has told Drapers that it too has reopened supply lines from China.
One high street supplier echoed this: “The good news is that supply lines from China are all back to full capacity for us as a company. Obviously this European side and America are going to get hit next.
“As a supplier, we seem to have got through that situation but we don’t know what the future holds for retailers and where they’re going to be. Hopefully, the government will have a VAT [relief] window or maybe a rent [relief] window. Right now [high streets] are not going to be busy because people are scared of something else.” As Drapers went to press on Tuesday, chancellor Rishi Sunak announced £330bn of financial guarantees to support business.
Many retailers have already begun to shut UK stores and reduce trading hours as a result of reduced footfall. Anthropologie has closed all its global stores until at least 28 March and Urban Outfitters announced all stores will be closed until further notice.
Lifestyle retailer Boden’s stores closed from Tuesday – a decision that will be reviewed on 27 March.
Founder Johnnie Boden said these are “strange and scary times”, adding: “We are all thinking about our families and friends at the moment, particularly the old and the vulnerable. We will do our utmost to keep our websites and warehouses trading and delivering everything you love about Boden.”
Mountain Warehouse is considering cutting 2,000 jobs as coronavirus is causing a “catastrophic” drop in sales.
The outdoor clothing chain’s founder and chief executive Mark Neale told BBC Radio 4’s Today programme: “Our sales have completely evaporated since Thursday and Friday last week. Yesterday our sales were about 50% down on what we would expect, and following the announcements yesterday I expect they are going to be worse today and tomorrow.”
Shoe Zone is planning to cancel its final dividend payment after a drop in footfall at its stores as a result of coronavirus.
One high street retailer told Drapers: “We’ve done cashflow planning that says we trade for the next two or three weeks, we close for four weeks and then we open after that. We’ve pretty much written off this year.”