'Discount addicts' in threat to stores as experts say 15 more chains will collapse

Daily Mail 28th December 2008

Experts warned yesterday that Britain has become addicted to discounts after retailers suffered their worst Christmas for decades.

And stores now face the daunting task of trying to sell products at full price this spring during a difficult time for the economy, with falling house prices and Sterling causing nervousness among consumers.

Shoppers who shunned the High Street before Christmas have flocked to sales this weekend to cash in on massive discounts of as much as 90 per cent.

In balance: Experts fear the collapse of stores like Woolworths and Zavvi is only the beginning

Many retailers and shopping centres across the UK also opened their doors for their first Boxing Day trading in a desperate bid to attract shoppers.

Visitors to stores across the country increased by an unprecedented 12.5 per cent on Friday compared to Boxing Day last year, according to preliminary data from monitoring firm Footfall released yesterday.

That compared to a decline of 1.5 per cent in December up to Christmas Eve.

'Consumers have realised that this is a waiting game you can take one step further,' said Jonathan De Mello, director of retail consultancy at Footfall's owner, Experian.

'Rather than waiting for sales to begin before Christmas, people are saving up for Boxing Day when they know the 50 per cent discounts pre-Christmas become 70 per cent or even 90 per cent off. It seems people are willing to spend, but only at a price that is becoming unsustainable for retailers.'

One clothing retail executive was more direct. 'We've been in a standoff with shoppers, and they've won,' he said.

In what has been a dire Christmas for most retailers, several chains have already fallen into administration. They includeWoolworths, the former Virgin Megastores chain Zavvi, Whittards, MFI and The Officers Club.

Store managers are now under strict orders from their head offices to clear stock in the next two weeks to release vital cash to pay rents, bills and, crucially, satisfy creditors. That means discounts at some stores may become even more desperate.

Banks, landlords and suppliers will be closely monitoring retailers' performance and will be keen to pull the plug and retrieve what cash they can before the coffers run dry.

More retailers are expected to fall into administration in the first few weeks of the New Year, particularly as executives use controversial pre-pack deals.

These allow owners and managers to momentarily place a business in administration in order to shed loss-making parts of the business and escape creditors.

Nick Hood, a restructuring specialist at accountant Begbies Traynor, has predicted the collapse of ten to 15 major High Street chains by the middle of January.

The scale of the problem facing retailers will become evident next week when Marks & Spencer, Debenhams, Next and Ernest Jones-to-H Samuel owner Signet release their trading figures.

Most are expected to report that sales are declining more rapidly than their most recent updates in autumn.

City analysts fear that chains selling expensive items such as electrical goods will be worst hit, with Currys and PC World owner DSG International predicted to issue one of the worst sales performances.