By Harry Mottram: Retailers have issued profit warnings reports The Grocer, with half of FTSE retailers issuing profit warnings citing weaker confidence as the main reason. Journalist Ed Devlin reported: “Pets at Home, Frasers Group and Shoe Zone were three of the FTSE retailers to warn about lower profits than expected in the final quarter of 2024 as businesses worried about the impact of tax rises and increased labour costs in the wake of October’s budget.”
Ian Carrotte of ICSM said: “We have many members in the homes and gardens retailing sectors who are concerned about the economic outlook created by the cost of living crisis. Labour’s budget hasn’t helped but the problems date back longer than the last 12 months with hikes in interest rates and energy costs along with inflation, higher labour costs and a bad Brexit business deal that continues to hit trade. Those profit warnings are the first signs of more problems to come so we always encourage businesses to be wary of late payment – the first sign a customer is in trouble. Look at any savings that can be made – often by downsizing but also saving on electricity with insulation.”
His concerns come against more bad news this time from Begbies Taylor whose Red Flag Alert report said that firms in ‘critical’ financial distress rose by 50.2% to 46,853 companies over the last three months of 2024. With consumers feeling the pinch the first thing most people do is to cut spending other than essential purchases – which is bad news for the High Street. It was underlined with WH Smith’s High Street sector being put up for sale with nobody declaring publicly they are interested but it is thought owners of private equity businesses would be the most likely buyer.
The main concern for the High Street is that a private equity buyer would see WH Smith as a chance to asset strip. Essentially, they would buy at a low price, sell the profitable outlets to the highest bidder, sell any valuable assets and move on having made a profit. The sale does not include the profitable WH Smith Travel Retail branch but the underperforming 500 High Street branches that make up a smaller profit than the successful airport one. With the demise of similar businesses like Wilko, Debenhams and in the past Woolworths, the industry has seen a shift in consumer patterns with online shopping growing and increased competition from rivals such as supermarkets who offer many of the stationery products WH Smith are known for.
ICSM’s Ian Carrotte
Ian Carrotte of ICSM said WH Smith were one of the fixtures of high streets across the country. He said: “As one of the largest stationers in the UK WH Smith have also one of the largest supply chains from paper supplies to books, newspapers and magazines as well as office equipment and greetings cards. It would be a sad day if they were to go after the potential sale. The stationer also has many outlets with post offices inside them – so it will be interesting to see what happens to those ones.”
Also in trouble is the St Giles Shopping Centre in Scottish city Elgin which has closed in January 2025 after being weighed down by debt. It was Moray Council that pulled the plug for a failure to pay £600,000 in business rates – although it is thought by insiders that the tenants of the centre like Waterstones and Subway had been paying their business rates. It means an uncertain future for the tenants and the centre and the suppliers.
Meanwhile collapsed Homebase has seen five of its stores acquired by B&Q in January who plan to turn them into DIY shops. The stores are in Leamington, Altrincham, Worcester, Biggleswade, and Basingstoke. Last year the DIY chain with 130 stores collapsed owing £100m to suppliers, customers and lenders with CDS buying 70 of the prime sites leaving the rest in doubt as their future.
The cost-of-living crisis has hit household budgets with many people putting off repairs to their homes due to rising costs. One trend that has been circulating on social media is that or DIFM or Do-it-for-me as Generation Millennium have not been inheriting ‘Dad skills’ associated with the Boomer generation who grew up doing up their newly bought homes themselves.
Another casualty this winter is MySpa (UK) of Chaddesden in Derby who sell hot tubs Clearly a cold winter and wet summer last year have not helped the firm, that entered liquidation on 19 December. Brett Barton and Dean Nelson of PKF Smith Cooper were appointed liquidators as the staff were made redundant.
And it’s not just smaller firms who are struggling. Supermarket giant Sainsbury’s are sacking the 3,000 staff in their cafes and management teams as they try to save money and overheads as they look to weather the harsh winds of the economic realities. Morrisons are also sacking around 200 staff as they look to cut costs. Both supermarkets have rather like department stores have a number of concession stores within their premises in an attempt to become mini shopping centres or high streets in a warehouse.
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For information on ICSM visit www.icsmcredit.com or call 0844 854 1850.
ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com