Retailer Risk Analysis

For those without the time or inclination to digest company accounts, but need to understand retailer financial stability and ability to afford rents, FSP monitors and reports on the financial accounts of over 1,500 occupiers.

FSP undertakes detailed analysis of accounts to produce a series of consistent indicators including Operating Profit, Net Worth, Total Creditors, Return on Trading Assets and the BIS P2 Wealth Creation Efficiency Ratio.

BIS P2 Wealth Creation Efficiency Ratio is a good general indicator of a retailer’s health. It is defined as;

The value added by a company (sales less cost of bought-in goods and services) divided by its cost of resources used (labour and depreciation)

FSP categorises the P2 Wealth Creation Efficiency Ratio to create a scale of financial performance:

FSP defines the ‘Very Worrying’ category as ‘At Risk’. For companies in this category, value added (sales less cost of bought-in goods and services) is less than the cost of resources used (labour and depreciation)

Retailers in the ‘Head above Water’ category are potentially ‘At Risk’ from factors such as contracting sales, rising rents/labour costs and price deflation.  Unless owners, managers and advisors more proactively identify and manage retail failures, the retail property industry is likely to continue to experience low income growth for years to come.

FSP Retailer Risk Reports have many applications, including;

• Pre-acquisition analysis of investment risk and security of income
• Assessment of development sustainability
• Targeting less risky assets for acquisition
• Identifying vulnerable assets (marginally viable retailers will depress sustainable rental growth and lead to undesirable voids)
•  Identifying vulnerable retailers for remedial intervention
• Assessing the sustainability of potential new occupiers
• Targeting healthy retailers as scheme entrants
• Assessing town centre risk outside investment schemes
• Town reports identifying ‘At Risk’ retailers are available from FSP for just £250 +VAT

Find out more

See an example report

Definitions

The Department for Business Innovation and Skills’ (BIS) Value Added Scoreboard measures companies’ efficiency for wealth creation (P2).
See 2009 BIS Value Added

Disclaimer: The content of these reports has been derived from statistical, trade and published sources together with FSP estimates and interpretation. Whilst FSP has used its best endeavours to ensure the accuracy of the information contained in these reports, it cannot accept liability for any data therein nor any interpretation made therefrom.

• Retailer Risk Analysis - Fees and Guide