United Kingdom undresses: fashion, in crisis under the shadow of ‘Brexit’
The good numbers go in the opposite direction to the way of many companies of British fashion, that are happening at the moment by economic hardships, that take them to look for agreements with their creditors.
British retailers do not go through their best moment. Despite the fact that sales of fashion in the country follow the path of growth, many British companies in the sector are suffering from economic problems, which have led to settle agreements with creditors or to fall into bankruptcy administration. Specifically, the number of companies that enter the insolvency has increased by 7% over last year, while the country is mired in political conflict by the Brexit.
In April 2019, fashion sales in the United Kingdom grew by 7.4% compared to the same period of the previous year. However, the same month, Arcadia, owner of Topshop, announced the closure of 67 of its stores.
Fashion sales in the United Kingdom have shown steady growth throughout 2018 and early 2019, remaining even above the European average in some months. Between April 2018 and March 2019, sales grew around 3% in all months. However, this May sales have fallen 4.5%, the biggest drop since 2015, which has been justified by the bad weather in the British country.
The favorable evolution of fashion sales in the United Kingdom contrasts with the economic situation of many of the companies in the sector in the British country
In addition, data from the European statistical office also show the rise of fashion in the British country in recent months, even surpassing the stability phase. The growth of 7.4% in April is well above the European average, which remained at 2.9% that month. April data added to the dynamics that already showed the sales of fashion in the country, when in March rose by 4.7%, leaving behind more moderate growth, according to the European statistical agency Eurostat.
In parallel with the growth of sales, there are numerous British retail companies that have been forced to restructure due to economic complications. One of the most significant examples is Arcadia. The company, owner of Topshop, recently reached an insolvency agreement with its creditors (CVA), after years of restructuring.
The agreement brings with it a series of structural changes that fully affect the Arcadia organization. The company controlled by Philip Green will dismiss 170 employees from its headquarters. In addition, the company will also close 67 stores of its brands, among which are Topshop and Evans, adding to the 210 establishments already closed by the company.
One of the British companies with more economic problems is Arcadia, which is in full restructuring
Arcadia has recently moved its path with the approval of the CVA and the announcement that the majority shareholder of the group, Lady Green, would invest fifty million pounds if the agreement with the creditors was approved. In this way, the group owner of Topshop momentarily avoids the bankruptcy process.
The crisis of the British retail is not reduced only to Arcadia. Among the 7% of companies that have chosen to reach agreements with their creditors are Monsoon, Mothercare and New Look. Monsoon founder Peter Simon has also sought to explore the insolvency agreement formula for his business. Simon announced that he would invest 34 million pounds to Monsoon, to try to convince his creditors that the business was still viable and not fall into insolvency administration.
Mothercare also announced that it was resorting to the insolvency agreement (CVA), which included fifty closures of its stores, while its former CEO, Mark Newton-Jones, took over the reins of the company. New Look, on the other hand, also resorted to reaching agreements with its creditors, taking the decision to close sixty establishments. The company has also had to close120 stores that it had in China.
The department stores, in the eye of the hurricane
The department stores are the businesses most challenged by the digitalization of retail. Marks & Spencer, Debenhams or House of Fraser. Marks & Spencer is also in the process of restructuring, with a program of cuts that has completely affected its fashion division. The department store group, which employs approximately 1,000 employees in its fashion section, recently announced that it would dispense with 47 employees from its purchasing, marketing and logistics departments.
Arcadia, Marks & Spencer and Debenhams are several of the companies with presence in shopping centers that have suffered economic hardships
Another of the companies in economic trouble despite the good path of retail sales is Debenhams. The British group also submitted to a CVA, to reach an agreement with its creditors under the protection of British law. The creditors thus granted a loan of 101.8 million pounds (117.5 million euros) and pledged to assume their debt. Also, the company has been forced to close fifty establishments from next Christmas.
House of Fraser is not going through a good time either. The company reduced its own brand portfolio from eleven to three to ensure its survival. The purchase of the group by the businessman Mike Ashley, Sports Direct, last year, has not yet paid off, as the company was forced to close three stores for not being able to renegotiate the rents of the premises. Despite this, the company was able to maintain its flagship store on Oxford Street.
Before the closures of establishments, the commercial centers of the country have also begun to suffer. The real estate companies in the United Kingdom, owners of this type of places, have started to go to the Spanish market to sell assets and, thus, face the fall of the business in their country of origin. Companies like Hammerson or Intu Properties seek to clean up their accounts in Spain after the retail apocalypse has caused the closure of many stores in the country's shopping centers.
While in Spain the retail apocalypse does not seem to have caused damage, the phenomenon has the United Kingdom in the spotlight. In the midst of the conflict over Brexit, the British country is the most affected by the arrival of ecommerce and its shopping centers have seen their business models have an expiration date. In this case, sales do not hide the bad path of British retail.
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