The UK high street is bracing itself for a collapse in consumer confidence and more retail casualties due to the impact of the global financial crisis.
Retailers told Drapers they were reviewing strategies and sales forecasts for the coming months in a week when the future of businesses including Miss Sixty, Joy and Hardy Amies came under threat.
House of Fraser chairman Don McCarthy typified the response of the retailers that Drapers spoke to, saying that businesses would have to batten down the hatches. “We should all conserve cash, cut costs and keep an eye on things so we are in shape for Christmas,” he said.
“Christmas is always tough, but there is more uncertainty this year. With everybody talking about the banking crisis it will affect consumer confidence.”
He also insisted that the House of Fraser business would not be affected by turmoil in the Icelandic banking markets.
Derek Lovelock, chief executive of Mosaic Fashions, owner of retailers including Karen Millen and Oasis, said the reverberations of the troubles in the global financial markets should not be underestimated.
He said: “It’s had a big impact on consumer confidence. The economy might bounce back soon, but it might not. There is a huge pressure on us as retailers. Sales are tough and consumers are concerned. We really need to focus on the business now.”
The boss of another department store said: “We’re scared. Events have been so dramatic, who knows what the implications will be?”
One footwear boss added: “Certain retail sectors will be decimated, with young fashion doing better than most and everything else coming down to a lottery for market share.”
Brands and suppliers were also feeling the strain. One menswear brand’s head of sales said the uncertainty was the biggest problem. “Even if you get a big order, you think ‘are they going to take the stock? When are they going to pay me?’”
Other commentators have predicted that acquisitions and other deals would dry up. Angus Monro, former boss of value retailers Matalan and Instore, said he had put acquisition plans on hold. “Valuations will fall,” he said. “It’s difficult to deal in the current market because even though there is debt available you would struggle to secure a good debt package.”
In the week that tailoring brand Hardy Amies was set to appoint an administrator and young fashion retailer Joy announced it had gone into administration, other industry operators predicted there would be more fallout, mainly for small and medium-sized firms.
Lee Manning, reorganisation services partner at financial advisory firm Deloitte, said: “We are not tearing around with insolvencies coming out of our ears but the pace will step up and there will be more. Some retailers are big enough to take the hit but you could see a cascade of retail failures.”
Jeremy Rance, national director of retail and wholesale at Barclays Commercial Bank, said: “We are confident and focused on our retail investments but if there are banks that want to get out of the retail sector then a small or medium-sized business could be vulnerable depending on their balance sheet strength.”