In the UK, retail stands as a formidable force, serving as a primary engine for job creation, economic growth, and consumer spending. From refining sales strategies to streamlining logistics, the industry continually innovates to enhance customer satisfaction and drive broader industry trends. 

However, amidst escalating insolvency rates since 2023, retail has found itself among the top five sectors facing significant challenges. Factors such as surging living costs, elevated energy expenses, reduced consumer expenditure, and disrupted supply chains have compounded difficulties for retailers of all sizes. Let’s take a closer look at emerging trends to understand the prospects for distressed business acquisitions better. 

Sector Overview

According to the Office for National Statistics (ONS), British retail sales volumes stagnated last month, marking the first time revenues have not seen a monthly increase since December. Economists, surveyed by Reuters, had largely anticipated a 0.3% rise in sales volumes following recent easing of high inflation. However, the ONS reported that sales volumes remained unchanged at 0.0% in March, following a slight 0.1% uptick in February. 

While non-food stores experienced a 0.5% increase in sales volume, driven by heightened foot traffic reported by some retailers, this was offset by declines of 0.7% and 1.5% in food stores and non-store retailers, respectively. Notably, secondhand goods stores, hardware and furniture stores, and clothing stores saw increases in sales. 

However, department stores, food stores, and non-store retailing experienced declines, with retailers attributing this to rising prices impacting consumer spending habits. In February, ONS data revealed that UK retail sales remained stagnant but exceeded expectations, showing no growth during the period compared to a 3.6% increase in January

Online spending saw marginal increases of 0.1% month-over-month and 1.7% year-over-year. Both sales values and volumes remained unchanged for the period, as per the ONS. There was a rise in sales at hardware stores, furniture shops, petrol stations, and clothing stores, which were countered by falling food sales and in department stores due to higher prices. A longer-term uptick in retail sales over the latest three months was also noticed, following a subdued Christmas period..

Opportunities in the Distressed Market

Flat retail sales volumes present a range of acquisition opportunities for distressed business buyers. However, thorough due diligence and careful consideration of market dynamics are essential to mitigate risks and maximise the potential for success. Some options include:

Acquisition of Underperforming Food Stores and Non-Store Retailers: With food stores and non-store retailers experiencing declines in sales volumes, targeting these struggling businesses for acquisition could involve purchasing distressed assets, such as inventory or customer databases, at potentially discounted prices.

Expansion into Non-Food Retail Segments: Despite the overall stagnation, certain non-food segments, such as secondhand goods stores, hardware and furniture stores, and clothing stores, saw increases in sales volumes. Distressed business buyers can capitalise on this trend by acquiring businesses operating in these segments to diversify their portfolio and tap into growing consumer demand.

Opportunities in Online Retailing: While overall retail sales volumes remained unchanged, online spending saw marginal increases both month-over-month and year-over-year. Distressed business buyers could target distressed online retailers or invest in improving their own e-commerce capabilities to capitalise on the growing trend of online shopping.

Turnaround Opportunities in Department Stores: Department stores experienced declines in sales volumes, attributed to higher prices affecting consumer spending habits. Distressed business buyers with expertise in turnaround management could explore acquisition opportunities in this segment, implementing strategic initiatives to revitalize operations and improve profitability.

Longer-Term Growth Prospects: Despite the short-term stagnation in retail sales, the ONS noted a longer-term uptick in retail sales over the last three months. This suggests potential longer-term growth opportunities for distressed business buyers who can navigate the current challenges and position themselves for future success.

High Street Woes | Restructuring Efforts Underway at Superdry

Superdry, a prominent UK fashion retailer, is facing significant financial challenges and has issued a warning that it could face insolvency without implementing a comprehensive restructuring plan. This plan includes delisting from the London stock market and seeking rent reductions for a substantial portion of its UK stores in order to secure emergency cash and return to a more stable financial position. 

Superdry shares experienced an initial 35% decline in early London trading before moderating somewhat. Over the past year, the stock has plummeted by approximately 94% To raise funds, the company plans to conduct an equity raise of up to £10 million, alongside plans to reduce rents at 39 of its UK stores. 

CEO Julian Dunkerton personally committed the entire amount. Shareholders will have the opportunity to vote on this three-year plan, with the intention of implementing these changes away from the public scrutiny of the stock market.

Buyers with a high appetite for risk and confidence in Superdry’s potential turnaround may choose to participate in the equity raise, potentially gaining a stake in the company at a discounted valuation.

Steep Valuation Decline for Getir

Delivery giant Getir is in discussions regarding a significant restructuring, two years after achieving a valuation of nearly $12 billion (£9.6 billion). The Turkish-founded company is exploring various options with its main investors, which could include breaking up the rapid delivery conglomerate, exiting certain markets, or implementing emergency restructuring measures. 

Established in 2015, Getir was among the largest of many delivery app companies that raised substantial funding during the pandemic. Despite its rapid expansion, Getir began withdrawing from several markets in 2023, focusing on streamlining operations.

While the company denied considering any insolvency processes, it is critical to stay on top of this information in the coming days as pivotal decisions are expected within two weeks. The potential restructuring could impact thousands of jobs across its operating markets, with details of the options still unclear. 

AlixPartners, a restructuring firm, is reportedly advising on the situation. This crisis underscores the declining valuations of once-prominent technology firms, highlighting the shifting landscape of consumer demand post-Covid lockdowns. 

The high street has witnessed numerous closures over the past year, with more closures expected. Experts caution that more failures are likely in the coming year as consumer spending remains constrained and borrowing costs increase. Notable closures in 2023 included Wilko, Paperchase, Cath Kidston, Planet Organic, and Tile Giant, while recent collapses such as The Body Shop and Ted Baker underscore ongoing challenges faced by retailers.

To learn more about distressed retail businesses, assets for sale and promising acquisition opportunities in this sector, stay tuned to Administration List today. Our real time listings and growing administrator contact base can solidify your acquisition strategy. Stay informed, stay ahead.