Financial Health Warning
30.01.2009
Analysis by retail business consultants FSP shows that the financial accounts of 40% of multiple retailers, with a combined total of almost 13,000 stores, are Very Worrying. By linking these store locations, FSP has produced the first geographical assessment of the impact of At Risk retailers on towns and shopping centres. While the analysis identifies some regional and size related drivers, locally more complex factors are at play.
Companies have been identified as Very Worrying by applying the DIUS Wealth Creation Efficiency Ratio to the financial accounts of over 600 multiple retailers. All the recent failures of multiple retailers, bar one, had previously been classified as Very Worrying. The Very Worrying category includes all companies whose Value Added (sales less cost of bought-in goods and services) is less than the cost of staff and depreciation. With basic operating costs not being covered, these retailers are At Risk without continuing investment.
The key findings are:
• 50% of Household Goods and 49% of Food retailers are At Risk
• Only 21% of large stores are classified as At Risk
• Towns in London, Scotland and Wales have higher than average concentrations of At Risk retailers.
• Towns in the East Midlands, North East, West Midlands and Yorkshire and the Humber have lower than average concentrations of At Risk retailers
• Large towns tend to have lower than average concentrations of At Risk retailers
• Small towns, particularly minor district centres, tend to have higher than average concentrations of At Risk retailers
• Regional Shopping Malls have lower than average representation of At Risk retailers
• Shopping Parks have lower than average presence of At Risk retailers
• The major towns least At Risk are Chesterfield, Lincoln, Bedford, Wolverhampton and Middlesbrough
• The major towns most At Risk are Croydon, West End, Bromley, Chelmsford and Blackpool
• Shopping Centres most At Risk include Churchill Square (Brighton), The Glades (Bromley), Frenchgate (Doncaster), County Mall (Crawley) and Golden Square (Warrington)
Shopping Centres least At Risk include Cwmbran Shopping Centre , Brent Cross, Bull Ring (Birmingham), Whitefriars (Canterbury), and Meadowhall (Sheffield)
Geoff Nicholson, Managing Director of FSP comments: "FSP has been monitoring the financial health of retailers since the early 1990s. In recent years, the proportion of At Risk retailers has increased substantially. Asset managers and local authorities need to realise that the problem is real and continuing. The lesson from the early 1990s is that identifying the vulnerable occupiers and putting contingency plans in place will shorten void periods, reduce leasing costs and maintain income."
Download the full Financial Health Warning Press Release here
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As always with FSP, a well researched high quality project.
Richard Wassell BSc MRICS
TwentyRetail