FSP MD Geoff Nicholson comments on London's King's Road retail offering
09.02.2009
"Recession’s Rocky Road"
By James Cusick, Westminster Editor
Sunday Herald
Excerpts:
February and March are known in the retail industry as the "graveyard months"...
...Lord Mandelson's Business, Enterprise and Regulatory Reform department (Berr) currently holds a lengthy list of retailers with multiple outlets throughout Britain. Close to 240 names are in the "worrying" or "unsustainable" category, needing new investment, which is scarce, or more shoppers, which in the current belt-tightening recession looks unlikely to happen any time soon...
...Geoff Nicholson, of the FSP retail consultancy, believes that on Berr's "worrying" list there will be names with outlets on the King's Road. From Sloane Square to World's End, there are 280 shop units, comprising restaurants, banks, furniture stores, a couple of cinemas, galleries, and the sector that gives the King's Road its fame - fashion...
...A few other casualties are sprinkled along the road, but as you get nearer to Sloane Square and the names get more familiar, there's just the occasional "for rent" sign...
...So does some 7% of the King's Road being empty constitute a retail crisis?...
...Nicholson at FSP thinks too much has been made of the recession's casualties. "Christmas was bad, but not as bloody as many thought. There have been retailers who've just kept going for years and all this recession has done is to put them out of their misery." Nicholson cites Woolworths as the obvious example. But an upturn? "There will be no growth until 2010 at the earliest. It will be tough. Lower rents will help, but gross margins are more important. Rent is significant and becomes more significant if it accounts for 20% of your gross margins. But if things have got to that stage, it may be too late. For the bigger stores rent is often just 5% of their margins. So the problem isn't rent at the moment."...
...Looking ahead, Nicholson isn't pessimistic. He thinks there will be more emphasis on stores offering value for money. Stores that remain targeted to young people will continue to do well. And for the places that cater to the very wealthy, there was a recent shaft of light, with the investment bankers Seymour Pierce pointing to the stocks of some luxury brands and describing their future value favourably. A counter-intuitive bet? Nicholson doesn't think so. His bottom-line forecast is that the good people will survive the downturn. They usually do...
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A very useful way of keeping up to date with what's going on in retail.
Charles Denton
Property Director
Cornish Bakehouse