Yahoo Finance 'Worse than 2008' - the UK high street is in crisis
The UK high street appears to be in crisis, after a week that saw poor results and in-fighting at some of the best-known retail companies.
Clothing retailer Bonmarché (BON.L) issued a profit warning on Thursday morning, citing “unprecedented” trading conditions on the high street.
Chief executive Helen Connolly went so far as to say that business was “significantly worse even than during the recession of 2008-9”. The company’s worst-case prediction is a £4m ($5.05m) loss, down from a previously estimated pre-tax profit of £5.5m.
In a statement that may worry the rest of the sector, Bonmarché described Black Friday sales as “extremely poor” and said that uncertainty from Brexit negotiations meant that there was no hope of profit over the course of the year to March 2019.
Across the high street, there were fireworks at Debenhams (DEB.L), the embattled department store. Major shareholder Mike Ashley questioned why the company turned down the offer of £40m in cash, though he was reportedly asking for a further 10% equity stake.
EXCLUSIVE: here’s the letter Mike Ashley sent Debenhams boss pic.twitter.com/a0B7kxFqhY
— Ashley Armstrong (@AArmstrong_says) December 13, 2018
In a letter to Debenhams chief executive Sergio Bucher, Ashley said: “November was the worst November for retailers in living memory.
“The market is saying that you’ve got no credit insurance, advisers and the banks are telling key suppliers that they shouldn’t trade with you at a level above which they can afford to lose.”
Debenhams is attempting to relaunch itself by focusing on the teenage make-up market but has as yet failed to improve its situation. In October this year, it announced a record annual loss of £491.5m, and revealed plans to close 50 stores, up from just 10 as previously announced. The company currently has a debt burden of £321m.
Ashley announced on Thursday that his own House of Fraser business, owned by Sports Direct (SPD.L), was losing £3m a week.
READ MORE: Where to put money if you’re worried about Brexit
The news of retail trouble followed two other warning signs on Wednesday. Dixons Carphone (DC.L) announced striking losses of £440m in the first half of its financial year. £344m of that was from a write-off in the value of its mobile phone brand. While it stuck to its plans to close 100 stores, chief executive Alex Baldock said that figure was “under review”. The electronic retailer also cut its dividend by two-fifths for the year.
There is also dissent at clothing brand Superdry (SDRY.L), with open disagreement between co-founder Julian Dunkerton and chief executive Euan Sutherland. Dunkerton has called on shareholders to return him to control of the company in order to execute a turnaround after Sutherland cut the brand’s online offerings.
Profits are predicted to be between £55m and £72m for the year, down from the previous 12 months’ £97m, and half-year results are down 49%.
Dunkerton claimed the performance by the management “rips apart [his] soul” and said: “This is about people who are out of their depth.
“In the top team there is nobody with clothing or brand experience, and that’s a major issue.”
If this were not bad enough, the wider atmosphere on the high street is one of pessimism amid consumer cost-cutting. Budget clothes retailer Primark (ABF.L) reported negative results for the month of November, as the negotiations over Brexit entered what had looked to be their final stages.
Elsewhere, worrying news from John Lewis and supermarkets Tesco (TSCO.L) and Sainsburys (SBRY.L) also emerged in the run-up to Christmas.
John Lewis said last week that sales were down 5% at its stores, and research firm Kantar Worldpanel said Tesco and Sainsbury’s had both lost market share to cheaper rivals Aldi and Lidl.
Retailers will be hoping for a Christmas boost, but there are few signs of optimism for the year ahead as many brands struggle to adapt to the decline of the British high street as we know it.
