High street braces for wave of failures as La Senza closes 80 shops

Thousands of shop workers stand to lose their jobs this year as some of the high street's best-known names face financial ruin despite a rise in business over the holiday period.

Poor sales in the runup to Christmas have been the final nail in the coffin for struggling chains such as lingerie retailer La Senza, Millets-owner Blacks Leisure and the nostalgia gift retailer Past Times.

KPMG, which is working on an emergency rescue for La Senza, announced this weekend that more than 80 of its stores would close, which is likely to result in many hundreds of layoffs. La Senza's website showed a list of branches destined for the chop, including those in major cities such as Bristol, Cambridge and Edinburgh.

A wave of store closures and job losses at Blacks and Past Times is expected to follow in the coming weeks. Between them, the three chains employ more than 7,000 people. Jonathan De Mello, head of retail consultancy CBRE, said 30,000 to 40,000 retail jobs could disappear over the next 18 months as a "retail recession" chews up the high street.

"It might not be an official recession, but we are in a retail recession," he said. "Retailers are experiencing falling sales and profits."

Last month De Mello predicted 20,000 retail job losses in 2012, based on a 1% rise in shop vacancy rates. But after weak festive sales that figure now looked conservative, he said, warning it "could be double that".

A taste of the carnage to come was seen last week when more than 1,800 store staff were made redundant at Bradford-based shoe group Barratts Priceless and Scottish fashion chain D2. Another 400 jobs also hang in the balance at toy chain Hawkin's Bazaar, which went into administration on Friday.

There will be an anxious wait to see how HMV fares over the crucial Christmas trading period, which is when it makes all its profits. Last month the troubled entertainment chain, which has debts of £160m, warned the tough trading conditions "cast significant doubt on the group's ability to continue as a going concern in the future".

Jamie Constable, chief executive of restructuring firm RCapital, said retail casualties this year could top those of 2008, when the collapse of Lehman Brothers helped to plunge the world economy into recession. A total of 349 retail companies in England and Wales went bust that year, including Woolworths, with the loss of more than 20,000 jobs.

Constable said: "High-street retailers are facing rent rises and wage inflation which is coupled with a drop in sales...for many retailers, the numbers simply don't add up." He added that the extra burden of VAT bills in the first quarter of 2012 could be the "final straw" that tipped some firms into failure.

Analyst Maureen Hinton, of the research firm Verdict, said: "Many of the retailers that have got into difficulties have high debt levels and trading is not producing enough cash to service it. When debt was cheap and the retail environment was buoyant, weaker operators were shielded, but with little or no growth in many retail sectors, any progress is achieved only at a rival's expense."

Verdict predicts that retail sales will only grow by about 1% this year. In the past 40 years, spending will have only have been weaker in 2009 and 2011. Britons began tightening their belts in 2007, and by the end of 2012 spending on clothing and household goods will have declined by nearly £10bn — almost the equivalent of the annual non-food sales of John Lewis, Next and Marks & Spencer put together.

The traditional high-street store model has been undermined by the growth of the internet and huge out-of-town supermarkets selling everything from groceries to sofas, clothing, shoes and CDs.

Huge sales volumes enable the supermarkets to offer the low prices that specialists such as Mothercare, La Senza, HMV and Game struggle to match. "When you are reliant on just one product, there is no alternative if that product is not selling well," said Hinton.

Property analysts say the challenges faced by high street operators will only intensify this year as planning permissions have been granted for new supermarket space with the equivalent footprint of another Tesco. These market forces have already changed the complexion of many UK high streets where traditional retailers such has newsagents, butchers and fashion stores are giving way to cafes, pubs, restaurants and takeaways.

Robin Knight, partner at restructuring firm Zolfo Cooper, predicted tomorrow's high streets would follow a "Tesco and Chanel" model as the supermarkets increasingly dominated clothing, books and home furnishing sales, and only "power" brands that excite consumers like Apple and Superdry cut it on the high street: "Everything else in the middle is effectively fighting for survival," he said.
(from Guardian)

I am very surprised that la senza is facing difficult time s- whenever I have been in there it is always heaving with people - The economy is obviously to blame - HMV - I went in local shop before christmas and found it very different to the past in the way that they have less stock.......