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The cost-of-living crisis will lead to more retail failures over the next year, and big companies are in a position to buy out hard-hit competitors, according to retail experts.
It comes after an increasing retail collapse towards the end of 2022, with high-profile bankruptcies such as Joules and Made.com.
Credit insurance experts at Atradius said claims surged across retailers and consumer goods companies over the past year. This points to heightened uncertainty and suggests other companies have begun refinancing and extensive restructuring.
Erin Brookes, managing director and head of European retail at Alvarez & Marsal, said the deal, in which Next acquired the Joules and Made.com brands from management, is a big deal for smaller companies under pressure from rising costs. He said it could lead to further consolidation.
She told PA News Agency:
“These still have something to offer, so some of the larger and more robust groups will definitely see an opportunity.
“This is likely to include bailout deals from other retailers and investment firms or acquisitions of companies that are just an opportunity, and given how much their stocks have fallen, they are likely to be priced lower. You might buy the company at the price you feel.”
Over the past year, online retail giants Boohoo and Asos have seen their shares fall more than 70% amid slowing demand following store reopenings and pressure on budgets.
Brooks added that Christmas this year could be invaluable for many retailers as 2023 could get off to a rocky start ahead of a confirmed recession. .
she said:
“A good Christmas gives them a solid footing, but if some retailers under pressure report weaker-than-expected deals, they’re considering their next options. There is a possibility.”
Atradius said pressure on the retail sector led to a 71% increase in billings compared to 2021, but this only worsened in the construction sector.
James Burgess, head of commercials at Atradius UK, said there was “a rise in delinquency and insolvency” in the retail sector as businesses were also affected by the end of the government’s aid scheme.
A number of retailers such as THG, AO World and Asos reportedly had their credit insurance cover cut throughout the year amid investor concerns, especially in the online retail sector.
he said:
“We will continue to monitor post-Christmas results, but we expect the negative trend to continue in 2023 as we have already seen some major setbacks in the fourth quarter of 2022.”
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