The news that single price retailer Poundworld is considering a Company Voluntary Arrangement (CVA), which could see the retailer close as many as 100 of its stores across the UK, is an indication that all is not well for bricks and mortar retailers, leading industry analysts warn.
Some 1,500 jobs could be at risk at Poundworld if the retailer, which is owned by TPG Capital, presses ahead with its plans.
Other high street retailers to pursue CVAs this year include New Look and Carpetright.
'Toxic Mix
“News of yet another CVA signals just how much distress bricks and mortar retailers are under," commented Richard Lim, chief executive, Retail Economics. "The toxic mix of rising costs, softer consumer demand and the acceleration of seismic structural shifts are pushing many business models to breaking point."
Lim suggested that the combination of having too many stores, rising operating costs and inflexible leases means the business is in "desperate need" of restructuring.
"Poundworld are by no means alone," he said. "The chasm between traditional retail operating models and what's needed in today's world of digitally driven shoppers has never been greater. As retailers look to reshape their operations, managing transformation of outdated business models will be critical in order to thrive."
Discount Retailers
Elsewhere, Catherine Shuttleworth, CEO at shopper and retail marketing agency Savvy, said that the possible CVA means that even retailers catering for the lower end of the market aren't immune to the challenges facing retail at present.
"Even discount retailers are not immune from overcapacity in the market, weakening consumer demand and improving competitors," she said. "Price inflation is also the Pound retailers greatest enemy. Shoppers are no longer prepared to be fobbed off by smaller products (shrinkflation) and product reengineering to match a £1 price point.
"This business was at its most successful when it was simple and agile, unfortunately it feels like it’s new owners have introduced greater complexity and slowed the business down a bit which has lead competitors to steal a march.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
