The Plight of High Street Retailers Amid the Covid-19 Crisis

In the last around three months, since the Covid-19 outbreak, the UK government has imposed lockdown and urged its people to observe social distancing. As on 20^th April 2020, according to the World Health Organisation (WHO) website, the confirmed cases of Covid-19 across the globe have now exceeded 2,300,000, along with 150,000 plus deaths in more than 200 nations.

While all the industry segments are deeply impacted with the spread and consequently the lockdown implemented by the respective government. Few of the sectors have been devastated, as the coronavirus pandemic takes a toll on the whole global economy, amid this most of the high street retailers have closed their shops due to falling footfall and ensuring safety of their employees. However, as of yet nothing much can be said about the timelines of things returning to normalcy.

The coronavirus pandemic has put millions of jobs at risk around the world as businesses struggle to get revenue through the doors and coping with the financial crisis created by the shutdown. The economy is made up of transactions. With lockdowns imposed, these transactions disappear, and the economy goes for a toss, as the cash flow of the businesses is affected. High-street businesses are one of the hardest hit sectors which heavily rely on footfall, and shoppers. Businesses have suffered most that were struggling prior to the coronavirus epidemic. Although most of the companies are seeking new partnerships to wither this storm, several companies have collapsed into administration.

Sir Philip Green’s Arcadia Group has reportedly notified the property owners, that it will leave stores where the leases are due for renewal. According to some media reports, the company tried to negotiate with landlords over reduction in rents last month but could not succeed.

These closures are not based on any brand particular. However, all the stores of the company remain closed due to catastrophe caused by the deadly virus across the United Kingdom. In this global turmoil, the company is also facing the heat and reportedly had asked its employees to apply for emergency wage scheme launched by the government and around 16 thousand employees could be furloughed. The company was already in soup before the coronavirus crisis happened.

London based Arcadia Group is a multi-retailer of clothing with several hundred franchises across the world. The company owns many high street retailers such as Burton, Evans, Miss Selfridge, Dorothy Perkins, Topshop, Topman, and many others. The company was formerly known as Burton Group Plc.

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Debenhams

Another London based multi-retailer, Debenhams deals in clothing & household products. The Departmental store chain reportedly collapsed into administration in early this month with nearly 20,000 jobs at risk. Even when the lockdowns are lifted, a significant number of its stores are likely to remain shuttered, eventually leading to a loss of nearly 400 jobs.

These lockdowns have reportedly induced fears that thousands of stores would never reopen anytime soon as the consumers have switched to online shopping from conventional brick & mortar stores. The switch comes naturally for consumers as the governments has asked them to stay indoors. However, most of the shopping done is only for essentials but gradually more product categories might be made available if the shutdown persists. These companies were already not doing so well, and the pandemic outbreak has only worsened their situation further.

Meanwhile, there are also some retailers who are withering the storm by raising funds. The book and stationery retailer, WH Smith Plc (LON:SMWH) has successfully raised £165.9 million from investors for greasing its wheels amid the coronavirus crisis while keeping its majority of shops closed.

In addition, the company has reportedly secured a new lending facility of £120 million subject to some conditions. Travel & Leisure is another sector which is badly hit by the global pandemic as travel restrictions were imposed. WH Smith Plc saw major drops in shoppers at its railway and airport outlets. However, the company shall continue to operate its 140 stores located in hospitals across the United Kingdom in these turbulent times by serving the NHS. In addition, the company’s high street business shall continue to operate its 200 plus stores with post offices to keep vital postal and banking services running in order to serve their local communities. Also, the company’s 80 stores located in hospitals will expand their grocery ranges in association with J Sainsbury to assist NHS workers.

WH Smith expects a steep fall in revenue by 90 per cent year on year further aggravated by reduction in operating profit by £39 million compared to previous year. The pandemic outbreak has a devastating impact on the businesses and till how long these situations will persist cannot be ascertained. Therefore, the company is likely to shut 95 per cent of its stores with re-openings done in a phased manner. Also, the company is implementing methods to preserve cash and reduce its cost base.

The company is likely to delay its non-essential expenses. The stores should continue to work with reduced business hours and the company would negotiate with landlords for rent cuts and linking rent with revenue generation. The company might have to cut jobs and make furlough arrangements for its employees and ask them to participate in British government Job Retention Scheme.

On 20^th April, while writing at 9:51 AM GMT, WH Smith Plc shares were trading at GBX 1,095, which were marginally up by 0.83 per cent from previous day closing price level.

Oasis and Warehouse Limited

Recently, fashion chain, Oasis and Warehouse Limited reportedly had collapsed into administration. The company would have 200 immediate job cuts and another 1,800 at the risk of being furloughed amid the coronavirus hit scenario. Despite several efforts by the management, it is not possible for the business to stay afloat amid this storm. Hence, the company has put itself into administration.

According to the British Retail Consortium (BRC), this decrease in sales was the worst which the world has ever witnessed. The sales numbers in fashion & clothing has been hit hard while sales of essentials, computers & gadgets, fitness equipment and indoor game equipment have gone up due to people working from homes and students learning from online modes. In addition, to support the disbursement of commercial rents to landlords, the British Retail Consortium has joined forces with landlord bodies the British Property Federation and Revo recently to avoid further retail bankruptcies.