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Published on July 15, 2020 by Holly Porter

commercial awareness

COVID-19 has had a huge effect on almost every industry, but the retail sector has been one of the worst affected. This article will take a look at some of the companies who have struggled to stay afloat and have made job cuts over the last few weeks and months.

Overview of the Retail Industry During Lockdown

In March, the monthly retail sales volume fell sharply by 5.1%, with clothing store sales recording the worst drop of 34.8%. Food stores were the exception with growth of 10.4%.

In April, the monthly retail sales volume fell by a record 18.1%. Clothing sales plummeted by 50.2%. As expected, online sales reached their highest on record at 30.7%.

In May, the monthly retail sales did recover partly increasing by 12%. This was largely driven by a strong increase of 42% in household goods. Further, the proportion spent online reached its highest on record at 33.4%. However, the volume of retail sales remained significantly below pre-pandemic levels.

So it comes as no surprise that the retail industry is struggling. Throughout a period of low sales, companies had to pay rent, although in some cases a reduced level, and employees. Now that the government’s coronavirus job retention scheme and various furlough practices are drawing to a close, there is a huge threat of mass redundancies within the industry.

In the first 48 hours of July, it was announced that over 12,000 people would lose their jobs, with many of these based in the retail sector.

Worst Affected Companies

Almost all companies who retail clothing have been negatively affected by COVID-19. Here are some but bear in mind this is not an exhaustive list!

  • Harrods: cutting 700 jobs, which equates to around 14% of  the total workforce. CEO Michael Ward has attributed the luxury department store’s struggle not only to lockdowns but worries that income from tourists will not return to normal for the foreseeable income.
  • John Lewis: closing 8 stores permanently, placing 1,300 jobs at risk. The John Lewis Partnership has entered a period of consultation however some affected staff may be able to transfer to a Waitrose store or work for the online arms of the company. Chair Sharon White has signalled the Partnership will invest heavily into e-commerce with estimated that between 60-70% of this year’s sales will be online.
  • TM Lewin: closing all 66 of its UK shops and laying off 700 workers. Despite an acquisition by a private equity firm in May, all concerned deemed the menswear retailer was no longer viable in its current format.
  • Cath Kidston: announced closure of 60 UK stores, with job losses of at least 900.
  • Monsoon Accessorize: has at least 545 jobs at risk as founder Peter Simon bought the business out of administration in June. More cuts are possible if he is unable to negotiate lower rates on 162 store leases.
  • Clarks: will cut 900 corporate roles over the next 18 months.
  • Oasis and Warehouse: entered administration in April, resulting in 1,800 UK job cuts

What is the Future of the Clothing Retail Industry?

There is a great deal of uncertainty regarding the future of the retail industry. Here are some predictions:

  • COVID-19 has arguably provided a fertile ground for private mergers and acquisitions. Private equity houses are able to acquire distressed companies at lower prices. However, as seen above, this does not necessarily spell a successful rescue.
  • There may be an increase in Company Voluntary Arrangements (CVAs) following the Arcadia model so as to pay rent monthly rather than quarterly.
  • After successes in online retailing, it seems likely that companies may disband their in-store vendor, especially in less popular locations, instead prioritising online operations.

Words: Holly Porter

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