Paphitis warns it’s ‘goodnight Vienna for physical retail’ without rates reform

Paphitis, owner of stationer Ryman, hardware business Robert Dyas and lingerie specialist Boux Avenue, issued the warning as he updated on trading.

He told Retail Week: “We must build on all the support the government has given to businesses over the pandemic. 

“The chancellor must recognise that if business rates, or, as I call it, the business destroyer, returns, it will have a catastrophic effect on physical retail and it will be goodnight Vienna. 

“Where there is a realignment in costs in this area, then there is a positive future for stores. Readdressing business rates has the power to help build retail up again or indeed destroy it.”

Retailers have benefited from a rates holiday during the pandemic and a review of the system has been undertaken, but publication of a final report on plans has been delayed until the autumn.

In the latest reported year, which only runs to the first week of the first lockdown in March last year, Ryman generated EBITDA of £7.8m – similar to the previous year.

Robert Dyas made an EBITDA loss of £3.1m versus a profit of £1.8m as it invested in infrastructure and building ecommerce operations.

Boux Avenue made an EBITDA loss of £14.9m, predating a strategic review that has made progress “significantly ahead of expectations”.

It is understood that, over the course of the subsequent year of lockdowns and Covid disruption, Boux and Robert Dyas have performed strongly online, but Ryman suffered overall as a result of its city-centre presence and the shift to working from home. 

Paphitis said: “The last 12 months have seen the acceleration of an online retail shift by at least five years and this is something I don’t see changing now. Consumer behaviour has flipped.”

He said that Boux was benefiting from improvements made by a new leadership team and product improvements, and that talks with landlords are ongoing to bring down costs.

Paphitis said: “The further accelerated shift of our Boux Avenue customer to online invites us to continue to adapt our model, including a renewed marketing and influencer focus, resulting in a stronger trading performance and brand exposure.

“We have engaged with landlords on a productive basis, as stakeholders, and this has been helpful in realigning costs to a more sustainable level overall. The profile of our store leases, with most expiring in the next 18 months, allows us to continually review the position and maintain what is an important channel.”

At Robert Dyas, online sales have risen from 20% of the total before the pandemic to almost 50%. Ryman has also “strengthened its ecommerce focus”.

While pleased with progress made during the course of the pandemic, Paphitis said: “It’s been the most challenging retail year of my life. The ups and downs have been unbelievable.”