Insolvency Expert Comments On Current Problems

The recent spate of administrations involving high-street brands demonstrates how changing consumer habits are having an impact on many retailers, according to an insolvency expert at Irwin Mitchell.

Companies including Habitat, TJ Hughes and Jane Norman have all come into difficulties in recent days, with the full impact of the current economic condition on the companies becoming apparent.

While Jane Norman has sold a number of its outlets in a pre-pack deal, TJ Hughes is seeking to appoint an administrator and all but three of Habitat’s stores being put into administration. It has since been confirmed that other retailers are facing difficulties.

Commenting on the problems, Andrew Walker, a Partner in Irwin Mitchell’s insolvency team and Yorkshire chair of R3, said: “In the aftermath of the last quarter-day we have seen many retailers enter into administration or announce the closure of loss-making stores.

“However, for many the quarter-day was simply the catalyst for their collapse. The high-street and the way consumers shop is changing and the rate of change has been sped up by the protracted economic downturn.

“R3’s latest consumer survey found that over eighty percent of consumers have changed the way they shop over the last year.  Over half of consumers are buying fewer non-essentials, with a quarter buying items in the sale rather than paying full price.

“However, the most significant change is consumers shift to the internet. Close to a third (31%) are now shopping online more and this has definitely impacted on those retailers that have a very heavy high-street presence.

“These businesses have to pay rent regardless of whether they are seeing less money going through their tills. For struggling retailers the demand for rent for the quarter has made them assess their profitability and sadly some have realised that they are unable to continue as they are.”