The number of retailers entering into CVA has decreased year on year while administrations are on the rise.
The retail sector’s CVAs decreased 24% year on year from 38 to 29 in 2019. There was a 38% decrease in large multi-site retailers choosing the restructuring method from 13 to eight, research from Deloitte showed.
The number of retailers opting for an administration process decreased from 125 in 2018 to 124 in 2019. However, in December, there was an increase with 11 in December 2019 compared to seven in December the previous year.
Deloitte partner and head of restructuring services Dan Butters said: “2019 has proven to be another challenging year for retailers. While the number of retail administrations has remained broadly flat on 2018, we have seen an increase in the number of large retailers entering into administration this year.
“December’s increase is most likely a reflection of increased complexity associated with the implementation of CVAs and further pressure on the high street as a consequence of structural change.
“We have seen consumer confidence and footfall continue to drop in 2019, which has been further exacerbated by narrowing margins from high levels of discounting – driven by a highly competitive pricing environment.
“However, entering a new decade brings fresh opportunities for retailers, particularly with a review of business rates as announced in the Queen’s speech in December. With this in mind, 2020 may see improvement in the retail environment for a number of retailers.”
He added: “While the squeeze in margins has continued to result in retailers operating a large number of loss-making stores, 2019 has seen a decrease in CVA activity, particularly towards the end of the year, which in turn resulted in an increase in the number of administrations.
“This is in part due to push back from the landlord community which has made CVAs harder and less attractive to implement. We believe this increase in administrations in December 2019 may be a sign of things to come in 2020 as retailers are left with fewer options to restructure their business.”
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