Weak retailers need to be weeded out

With the weak BRC sales data and a flurry of retailer administrations and CVAs, the host of retailers that were lining up to tell us how hard 2010 would be could be forgiven for thinking they’d been proved right earlier than they expected.

Luminaries like Sir Stuart Rose and Simon Wolfson were quick to qualify their Christmas trading updates by saying a combination of election jitters and tax rises would make 2010 the nightmarish year that was expected but didn’t transpire in 2009.

This week’s BRC numbers will lend weight to that view, with the worst January sales growth in 15 years being recorded. But why is anyone surprised? To record any growth in total sales in a month when a whole week was knocked out by the snow across most of the country is pretty respectable. It’s certainly not a sign that the UK consumer is losing her nerve.

But for those who work for or supply Adams, Ethel Austin, Suits You and Diamonds & Pearls, things definitely aren’t looking good. All four are long-term patients in retail’s casualty ward, and the list of names hitting the rocks is becoming wearisomely familiar.

Taking a dispassionate view, do any of these businesses have a long-term future? With the exception of Suits You, which is conducting a CVA, all have been in administration before, and history tells us those companies that go bust once generally collapse again.

While CVAs have been used in some cases of genuine restructuring - most notably JJB - both this mechanism and pre-pack administrations are open to exploitation by owners who take the opportunity to ditch creditors without doing anything to give the business new purpose.

The problem is compounded by landlords who, in their attempts to keep units occupied and avoid empty rates, do what they can to accommodate tenants going through restructuring. What they’re inadvertently doing is supporting businesses that have no hope of survival at the expense of their more successful rivals, which isn’t fair.

It may sound harsh, but retailers like the four mentioned above hitting trouble is not a reflection of the market. It just shows they have carved no clear position for themselves and are being soundly beaten by their rivals.

While it’s no consolation for those involved, that’s the sign of a healthy market and there are more retailers that need to go. UK retail, particularly fashion, has too many weak brands and too many stores. If consolidation does turn out to be the theme of 2010, that won’t be such a bad thing.