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— View from the City —
As after any massacre, bloodied survivors somehow emerge. Some are battered to the breaking point. Others may yet recover, often sold out of bankruptcy administration with fewer outlets and reduced rental burdens. Tea and coffee purveyor Whittard of Chelsea Ltd., previously owned by troubled Icelandic investor Baugur hf, was sold to Epic Private Equity Ltd. Others are still hoping to benefit from a similar rebirth.
But it has, so far, been relatively swift. One minute there was a
thriving retail sector, apparently untouched by the carnage in the
financial districts, and the next the Angel of Death loomed over Main
Street, (or the High Street, as we call it this side of the Atlantic),
his scythe mowing down the heritage names and the new kids on the block
with indiscriminate brutality. He has passed over those with strong
balance sheets and no debt, those who marked their lintels with the
mystical letters AAA; but the heavily indebted and the private
equity-backed are now praying to Heaven for salvation after Santa
Claus' more secular Christmas offerings failed to bring in enough money
to pay the rent and replenish the interest cover. Even those who have
done reasonably well, such as retail bellwether John Lewis Partnership plc, or its department store rival Debenhams plc,
are widely expected to continue discounting prices in the coming months
to keep the tills ringing. Cash-strapped consumers may be, but they
know a bargain when they see one.
No wonder retail consultancy Experian plc predicts that one in seven of Britain's shops will be unoccupied by the end of the year as 1,600 retailers go out of business. At first glance, it seems as though Continental Europe might have been spared the carnage meted out in Britain and Ireland, where the non-food retail sector depends to an extraordinary degree on an ever-shorter period of consumer frenzy in the post-Christmas sales, and some of the biggest names have been forced to start offering huge discounts before Christmas. There have been few notable bankruptcies to date in the retail sector across the English Channel and the North Sea, although there have been some exceptions. French fashion retailer Morgan International, part-owned by Apax Partners Worldwide LLP, went bust late last year -- partly dragged down by its U.K. business, while Dutch lighting specialist Lampenier BV was also forced to hit the off switch in November, before being bought out of bankruptcy by a Fortis Bank SA/NV fund. But even in Germany, which experienced a spate of insolvencies in the summer, the problems date back to well before the credit crunch. Consumers there have been reluctant to spend money for a decade or more and had only begun to loosen the purse strings during a short-lived recovery in 2006 and 2007. But Simon Chinn, an analyst at retail consultancy Verdict Research Ltd., warns it is too early to make any assumptions. He argues that the Christmas period is as important in much of Europe as it is in the U.K., and although stores there have not released as many figures yet, there has been a lot of discounting and many pre-Christmas sales. France's Carrefour SA, Europe's largest supermarket chain, warned just before Christmas of deteriorating global consumption trends and a need to pursue aggressive promotional activity, and in Spain and the Baltic states, which have experienced housing crashes as virulent as those of the U.K. or Ireland, there have been clear signs of slowing consumption in recent months. The credit crunch has made life as difficult for Continental consumers, retailers and suppliers as for their U.K. counterparts. If Chinn's analysis is correct, prospects for discretionary spending across Europe will remain bleak, and the numbers, when they do come, could set off another series of bangs. |
That almighty pop we heard in the shopping mall? The unmistakable sound of a bubble bursting. No long, drawn-out hiss for Britain's retailers, but a short, explosive bang, a series of secondary retorts as huge quantities of excess merchandise are knocked down and hurriedly sold off to bargain-hungry consumers, and then, finally, the wailing of the unemployed. 
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