Yahoo Finance John Lewis cuts could herald death of the department store
A raft of struggling department stores may never reopen as the high street struggles to recover from coronavirus, retail experts have warned.
Fears are growing that dozens of sites across Britain could shut for good, with analysts concerned the floodgates are now poised to open after John Lewis said it will pull the plug on eight of its 51 sites.
It came as one of Britain's top shoemakers pushed for a major rent cut, and landlord Great Portland Estates said that it is struggling to collect cash owed by tenants as retailers teeter on the brink.
The axe is expected to fall particularly hard on department stores, many of which were already battling to survive before the pandemic due to the rise of internet shopping and will now be left with no choice but to push through brutal cuts.
Richard Lim, an analyst at Retail Economics, said: “The model has been under pressure for many years. They are expensive to run, they are massive stores with long leases.
“It’s just whether they can be relevant or not with so much more of our shopping being done online.”
Patrick O’Brien, a retail analyst at GlobalData, said: “Department stores are going to struggle. There is a place for some of them, but not in locations we’ve had in the past. I don’t think they're going to be a staple of the high street.”
Industry insiders privately agree that the picture is bleak. One former department store boss said that the predictions about the death of the industry “are right” and their travails will be further exacerbated by coronavirus.
Job cuts at Harrods show that not even the upmarket chains such as Selfridges and Fenwicks are immune as they rely heavily on tourism and nearby office workers to keep the tills ringing.
Another challenge, Mr O’Brien said, is a ban on services that require close contact such as styling sessions – making the shopping experience less enjoyable and hitting firms' ability to expand their offering as customers head online for basic goods.
In another sign of the disaster sweeping through retail, Britain’s biggest shoemaker Hotter Shoes is demanding that landlords swallow losses of almost 75pc as part of a rescue deal to save it from collapse.
The company, owned by Electra Private Equity, has been particularly hard-hit by the Covid-19 crisis because its customers are older shoppers who have shunned the high street since the outbreak began.
All but 17 of the company's stores will be shuttered under revised restructuring plans. Landlords at Hotter’s closing shops are being asked to accept just 27.8p in the pound on rent arrears and remaining lease liabilities.
If property owners refuse, the firm will be placed into administration and they will likely get just 2.6p in the pound according to documents from Electra’s adviser KPMG. Around 370 jobs will go.
Landlord Great Portland Estates has collected just over a quarter of the rent that was owed by retailers and hospitality tenants from March up to now.
It lays bare the pain caused by the pandemic after non-essential businesses were forced to shut shop and their income dried up.
Great Portland said it has tried to be supportive of tenants who cannot meet their rent obligations.
