Warm weather leaves retailers reeling

A combination of mild winter weather and early discounting has left tens of thousands of retailers struggling in the run-up to Christmas, according to figures.

Picture: Ian Robinson

Clothing retailers have been impacted by what is shaping up to be the warmest December in 70 years, while Black Friday in November has led a number of high street chains to begin sales early, such as H&M, Gap and Jack Wills.

This has resulted in the number of UK retailers in “significant” financial distress lifting by 2 per cent to 24,737 in the final quarter of the year compared with 12 months ago, according to a report from insolvency specialist Begbies Traynor.

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The survey said the rise was “even more concerning given today’s low inflationary environment and rising disposable incomes across the country, and indicate that retailers’ drastic discounting over the past month has failed to draw in the crowds”.

Grocers have been hit hardest, with the number of retailers in significant financial distress up by 11 per cent to 4,226 in the quarter compared with a year ago.

The report said: “The supermarket price war continues to push margins to rock bottom levels and as families leave their big Christmas shop this year to the eleventh hour.”

Last month, supermarket giant Asda said it would shelve its Black Friday promotions this year, as they ate into pre-Christmas sales. Other retailers cut back on Black Friday discounting.

Begbies Traynor partner Julie Palmer said: “This year there has been more discounting than ever before from retailers in the run-up to Christmas, as Black Friday deals extended into more severe festive promotions to try and boost lacklustre sales volumes.

“Unfortunately the swathes of cut-price deals seem to have had little effect, with levels of financial distress among retailers even higher than last year’s shocking statistics.”

But the report did point to recent research from retail data firm Springboard, which predicted that shoppers in these final few days before Christmas will increase by 10 per cent compared with earlier in the month, to seek out last-minute high street deals now that most have missed the pre-Christmas delivery windows for online sales.

Ms Palmer added: “However with most of the UK’s parcels carriers still working through backlogs from earlier in the month and many consumers still haunted by last year’s delivery disappointments following the administration of (delivery firm) City Link on Christmas Eve, we expect to see a late surge of shoppers hitting the streets this week to get their hands on some last-minute bargains before the big day.”

Begbies Traynor tracked levels of corporate distress among UK businesses between October 1 and December 17.