Department-store group Debenhams has already gone through two insolvency processes, says Jonathan Eley in the Financial Times. Now it has asked landlords for an “immediate five-month rent holiday” because of the likely impact of coronavirus.
The request is on top of a previous plea for reductions in the estimated £250m that the store pays in rent and business rates, which was tied to a planned balance sheet restructuring. While Debenhams has refused to detail the impact of the virus outbreak on its revenue, it is likely to be “significant” given the location of most of its stores on high streets and in shopping centres.
Debenhams is hardly the only retailer to have caught the coronavirus, say Angela Monaghan and Julia Kollewe in The Guardian. Even before the latest social-distancing measures there were signs of a sharp drop in visitors to UK high streets and shopping centres, except at large supermarkets, where people are “panic buying”.
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One estimate said footfall on the high street at the weekend was 31% lower than at the same time last year. Visits to shopping centres were down 21%. But retail parks, which contain most large supermarkets, saw a decline of just 6.8%.
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Property landlords feel the pinch
It’s not surprising that companies are asking for rent holidays, since the costs of paying rent “could quickly become unaffordable” if companies can’t do business, says Aimee Donnellan for Breakingviews. What’s more, given the dearth of alternative demand, landlords seem to have little option but to accept their requests. Still, this is yet more “bad news” for property landlords, especially since many will still be grappling with “damage inflicted by online shopping, which reduces the need for physical stores”.
This week’s decision by Dixons Carphone to close 531 standalone stores is a reminder that selling goods on the high street has been a “tough game” ever since internet retailers “got into gear” a decade ago, says Dominic O’Connell for the BBC.
The company, which was formed as the result of a merger in 2014 between Carphone Warehouse and Dixons Retail, had hoped to be able to use its “financial muscle” to make a “decent fist of selling online”, while sharing millions by “rationalising the two companies’ retail estates”. However, continued losses and a declining shares of the market have made the latest closures “inevitable”.
Another retailer grappling with long-term problems is Laura Ashley, which has filed for administration after failing to secure £15m of emergency cash, says Laura Onita in The Daily Telegraph. Although the company has blamed the coronavirus outbreak for its demise, this is just an excuse, since it has been trying to find more money for a year.
Laura Ashley’s floral designs became a hit in the Seventies and Eighties, but it “has struggled in recent years to stay relevant and stop shoppers from deserting to nimbler rivals”.
