Recent data from the Office for National Statistics (ONS) reveals a slowdown in retail sales growth across Great Britain, with volumes increasing by just 0.3% in September 2024, down from 1.0% in August. Economic challenges have driven a growing number of UK firms into financial distress. Restructuring specialist Begbies Traynor reported that more than 632,000 businesses were in ‘significant’ financial trouble during Q3 2024, a 32% rise from the previous year. 

Notably, the 0.3% growth exceeded the expectations of City economists, who had forecasted a decline for the month. Let’s delve into some sector-specific insights and examine how they align with the current economic landscape in the country.

Retail Industry Insights – October 2024

For Quarter 3 (July to September 2024), retail sales volumes rose by 1.9% compared to the previous quarter, marking the largest joint increase since July 2021.Compared to the same period last year, retail sales volumes have risen by 2.6%, the largest annual increase since March 2022.

Non-Food Retailers Lead the Charge: Retailers in the computers and telecommunications space saw a significant 5.5% growth, likely fueled by students purchasing PCs for the new school term. Non-food retailers drove growth, with sales volumes rising by 2.5%.In contrast, supermarkets saw a 2.4% decline in sales, the largest drop this year.

E-Commerce Trends: Online spending rose by 1.3% in September and by 6.7% compared to the previous year. Although total retail spend grew by only 0.1%, the proportion of online sales increased from 27.5% in August to 27.7% in September.

This calls for a reassessment of business rates in the upcoming Autumn Budget. There was a noted  revival in clothing sales driven by consumer demand for seasonal updates, coinciding with the cooler weather. This is also supported by key retail events like Halloween and Black Friday, where retailers can utilise discount strategies to stimulate consumer spending.

As we enter the final “golden” quarter of 2024, all eyes will be on how retailers manage inventory and sales strategies to maximise profits while navigating the complexities of discounting and stock levels.

Capitalising on distress 

While certain segments of the retail sector are experiencing growth, substantial challenges persist that could threaten the viability of many businesses. Economic pressures—such as rising costs, inflation, and interest rates—combined with shifting consumer behaviours are creating a precarious landscape. If these challenges are not effectively addressed, we are likely to witness a further escalation in insolvency levels. 

Retail continues to hold the grim distinction of being the second most insolvent industry in the UK, following construction. Our platform tracked more than 30 retail businesses that entered insolvency in just the past week, with total assets exceeding £3 million. This alarming statistic highlights the critical state of the industry and serves as a clear warning signal that many retailers are struggling to meet their financial obligations, potentially leading to an uptick in insolvency rates.

The impending key retail events, including Halloween and Black Friday, present both opportunities and challenges. Retailers must implement effective discounting strategies to attract consumers and stimulate spending during these critical periods. However, poor management of these strategies could amplify existing financial strains. 

As the retail landscape evolves, businesses must remain agile and responsive to both economic shifts and consumer preferences. Without proactive measures and sound financial management, the outlook for many retailers remains bleak. 

Distressed Businesses in Retail | UK food supermarkets out-of-stock

Ongoing supply chain disruptions, border delays, and inflationary pressures on food producers contribute to the increasing instances of out-of-stocks on supermarket shelves. This has been highlighted by research from Pricer, a leading provider of in-store automation and communication solutions.

The study, which surveyed over 1,000 UK shoppers, found that nearly 18% of items in their weekly food shops are typically unavailable on shelves during in-store visits. This reflects a year-on-year increase of 1 percentage point. The issue is even more pronounced for online grocery shopping, where over 28% of consumers reported items being out-of-stock. This resulted missing or substituted products, a rise of 6% from the previous year.

Brexit emerged as the primary factor behind these shelf gaps, with 40% of respondents attributing difficulties with border checks and increased paperwork to challenges in importing food into the UK. Additionally, although only a small portion of UK food trade depends on Red Sea routes, 39% of shoppers perceive that supply chain disruptions stemming from the Red Sea Crisis have aided stock shortages.

38% of consumers link increased shelf gaps to production and manufacturing costs affecting food suppliers’ ability to meet demand. Furthermore, 37% of shoppers attribute rising out-of-stocks to food producers going out of business due to these cost pressures.

At the same time, consumer expectations regarding product availability are on the rise. Now, 74% of customers expect products to be available when they shop in-store. This is up by 5 percentage points year-on-year. While over two-thirds (67%) are willing to settle for alternatives, more than 43% would abandon their entire shopping basket.

The findings suggest a direct correlation between on-shelf availability (OSA) and customer loyalty, with 72% of shoppers more likely to choose grocers that maintain good product availability. Out-of-stocks lead to significant losses, including reduced sales, diminished customer satisfaction. They also aid a decline in market share, as well as increased labour costs from attempts to remedy poor OSA with outdated systems and processes. 

Distressed Businesses in Retail | Upcoming high street store closures

Following a bustling summer, several retailers, including Tesco, Boots, and Cineworld, are preparing to finalise numerous store closures. According to recent data from the Centre for Retail Research, an alarming 1,846 stores closed their doors in the first half of 2024, resulting in the loss of nearly 24,000 jobs.

Stores from more retailers are set to shut down by the end of October, including 

Boots

Last year, Boots announced plans to close around 300 UK stores after experiencing a challenging sales period. Since 2023, the pharmacy chain has shut down 290 locations, with the final 10 expected to close in the coming weeks. Despite efforts from loyal customers to save specific branches, Boots stated that most closures occurred in areas with other outlets nearby. Boots, which operated 2,200 stores in the UK and employed around 55,000 people at the beginning of the year, has since reduced its footprint to 1,990 locations.

Cineworld

Cineworld is also facing the impending closure of six UK locations as part of a significant restructuring plan. A spokesperson for the brand noted that this plan aims to provide a strong foundation for returning the business to profitability, attracting further investment, and ensuring a sustainable future for Cineworld in the UK.

Tesco

Tesco has announced the temporary closure of a superstore in High Wycombe, Buckinghamshire. A representative from Tesco stated that the superstore will reopen in autumn 2025 with a refreshed look and feel, which they are excited to unveil to customers.

Distressed Businesses in Retail | Kettle Home Ltd. enters liquidation again

Liquidators have been appointed to oversee Kettle Home Ltd, located at Earlstrees Industrial Estate in Corby, Northamptonshire. This is the business’s second liquidation in 2 years. All 80 employees, both part-time and full-time, have been made redundant due to insolvency.

The ongoing impact of the COVID-19 pandemic and soaring shipping costs have been cited as primary factors contributing to the company’s difficulties. The liquidators are committed to ensuring that employees receive their entitlements promptly.

Previously, a company named Kettle Interiors, operating at the same address, went into administration in March 2023 after more than 30 years of importing and supplying furniture. Kettle Home Ltd commenced trading in April 2023 but has now succumbed to financial strain, leading to the appointment of Kevin Mapstone and Yiannis Koumettou from Begbies Traynor as liquidators.

The retail furniture sector has faced significant challenges in recent years, struggling to recover from the pandemic’s effects. This situation, combined with sharply rising shipping costs, rendered Kettle Home unsustainable and unable to continue operations.

Kevin Mapstone of Begbies Traynor expressed his commitment to supporting former employees during this challenging time. He stated that their team is working diligently to gather information on the company’s situation and to seek the best possible returns for creditors. Communication with all creditors will occur in due course, and efforts will be made to ensure that former employees receive their entitlements as quickly as possible.

At this time, there is no information regarding the status of customers who have ordered furniture but have not yet received their items.

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