Q: “I’m the manager of a chain of small retail businesses, however, it is no longer profitable to keep all branches open. How should I go about downsizing whilst focusing resources in key locations?”
A: “Blame it on the weatherman” seems to be the common theme for retailers reporting financial woes this year. A series of factors, including high business and property rates, increased competition and the ongoing bricks vs clicks debate are making conditions on the UK High Street tougher than ever before. However, it’s the year’s unusually cold winter and hot summer that the big names in retail have continually blamed for their poor sales, collapses and CVAs.
For consumers, as for Goldilocks in the fairytale, it seems that conditions have to be neither too hot or too cold, but “just right”. While it may not be possible to predict the weather for the financial year ahead, thinking ahead to the future is essential for retailers looking to reduce fixed costs and remain profitable in an intensely competitive marketplace.
Weathering the changing retail landscape
While a business’s ultimate aim is to reallocate resource and boost their all-important cash flow, seeking appropriate professional advice is important if the process is to run smoothly and a failure to seek this support could prove a false economy in the long-run. For retailers with branches across several different locations, it is also worth not only considering current trading performance but future opportunities. For example, networking with property and leisure developers in rapidly-developing areas may well offer up clues about where the greatest footfall will occur months or years down the line, supporting decision making when considering which stores to close.
Forward thinking is also key when it comes to mitigating high property rates, which can form a significant proportion of a retailer’s cost base. Where possible, including a break clause in property contracts, considering upcoming rent reviews and avoiding taking out long leases can help to keep fixed costs down, reintroducing flexibility into the business.
While it may seem obvious, always start by working out what you have to save to make the company successful. By looking into the crystal ball of retail to predict future risks and opportunities, business owners can put themselves in a good position to overcome the dark clouds affecting the sector and unlock success in the years to come.
For more information on how your retail business can weather storms on the horizon, contact Menzies Insolvency Partner John Cullen on 02920 495444 or email jcullen@menzies.co.uk.
Posted in Blog, Retail