UPDATE: 15:15 - 16 January, 2012
Mere hours after this piece was written and published, video and game rental retailer Blockbuster was revealed to have also gone into administration. Blockbuster UK has 528 stores and 4,100 staff. Deloitte, which is also acting for HMV in its administration process, has been appointed as administrator.
The recession has claimed many high street retailers over the past five years, but it is possible to pinpoint common failings between them and spot the next retailers who might be at risk?
Recent retail failures include Woolworths at the start of the recession, a large number of clothing retailers, video game specialist Game, and in the past week Play.com has announced it will close its retail division, Jessops has gone into administration and HMV has called in Deloitte.
Despite the different offerings of the retailers, they do share common problems - including refocussing for the digital era, bank debt, leased property porfolios and being too closely aligned to consumers' disposable income.
Andrew Teacher, a property expert with Blackstone Communications, told the Huffington Post UK: "Other likely victims of the year ahead will include any similar stores that have an oversized physical presence and are unable to compete with the growing versatility of the Internet. Firms like Argos have already outlined plans to close stores, while the likes of Thorntons lack any kind of unique product offer - both stores should be carefully tracked over the coming months."
Darina Kerr, real estate partner at Dundas & Wilson, said even if you can get people to come into your stores, it doesn't guarantee success in this climate. According to Kerr, 60% of the UK population visited HMV last year, but that wasn't enough to save it.
"Footfall doesn't mean cash flow. The fact that customers are shopping less with their feet and more with their fingers has hastened the demise of a long list of retailers – in recent months JJB, Comet and Jessops have followed Habitat, Zavvi and Woolworths. Mobile shopping was hailed as the Christmas success story but its downside is the resulting pressure on bricks and mortar stores," she explained.
"As a nation we have moved from the high street to the istreet. According to the British Retail Consortium, while UK retail sales over Christmas were up 0.3% from December 2011, online sales were up a staggering 17.8%. And with the number of tablets found under Christmas trees this year, next year is likely to see this trend grow even more, particularly for those shops and products we may not traditionally have associated with the internet."
- Entertainers React To HMV's Collapse
- The Business Reasons Why HMV Was Doomed To Fail
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- From Jacko To Bowie: The Stars Who Performed At HMV (PICTURES)
- Third Time Lucky For The Turnaround King? What Next For Fox And Moore
- HMV: How Many Victims?
- HMV 'Under Threat' Amid Poor Xmas Trading
Will the bad news continue in 2013?
So which retailers should we keep an eye on now? Clive Black, retail analyst at Shore Capital, told HuffPost UK: "We see apparel, food and discount players as the most resilient store-based operators, given customers penchant for touchy feely; many other store chains remain vulnerable. The high street, however, has to evolve to bring back more residents and leisure/healthcare activities over retail."
Julie Palmer, partner at Begbies Traynor, named her top five industry sectors to watch for facing financial distress in 2013 as aviation, care homes, farming, local authorities and councils, and NHS trusts.
Since the start of the 2008-2009 economic crisis, more than 30 European airlines have ceased trading, and in the UK the Air Passenger Duty tax, which will add up to £188 to the cost of a ticket, will disproportionately affect UK-based carriers, particularly those operating internal flights.
Palmer added that 29% of care home firms in the UK are facing significant or critical financial problems due to squeezed family budgets, but also a reduction in government spending with local authority budgets for social care reduced by more than £600m between 2011 and 2012.
Pig farmers in particular have faced a difficult year, as reported by the Huffington Post UK last September, and local councils and NHS trusts will continue to find their budgets squeezed.
Another good place to start looking would be retailers who have negotiated a CVA and are still trading, according to one analyst, who asked not to be named.
"The majority of retailers who have done pre-pack deals, in my opinion, will go on to fail again. There's also the group that took on too much debt in the good times and now struggles to finance it - Peacocks was like that.
"With the Arcadia group, Top Shop is brilliant, but the rest is rubbish. A lot of those chains would have disappeared if they were stand alone businesses and didn't have the support of Top Shop."
Another analyst, who asked not to be named, told Huff Post UK: "Mothercare (in the UK) has too much bricks & mortar, only an average online offering, is seen as having premium prices and faces strong competition from Kiddicare. It's also loss-making, has high debts against a low net worth, and a high inventory."
Globally, Mothercare appears to be performing well, but according to its last financial statement, it made an operational loss in the UK of £24.7m for the year end March 2012, and sales were down 4.6%.
The analyst also suggested that Dreams could be at risk; based on their own unofficial report, they noted Dreams was private equity owned, loss-making after debt costs, and "had a negative net worth of £79m, debts of £274m".
"Vulture funds are already circling, as they were at HMV," the analyst added.
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