Trade body warns of 'significant' retail failures in new year

IRELAND’S RETAIL sector will be hit by a wave of business failures in the new year as Christmas sales prove insufficiently high to keep struggling shops open in 2012, Retail Excellence Ireland (REI) has warned.

The industry trade body, which is due to publish a pre-Christmas trading update today, has formed an agreement with insolvency specialist Hughes Blake that will make its company rescue services “more accessible” to retailers who run into trouble in 2012.

REI chief executive David Fitz-Simons said yesterday there would be “a significant number” of applications for examinerships to the High Court in January.

Under examinership – a court-supervised corporate rescue mechanism – companies have the opportunity to secure protection from creditors as they try to restructure.

Mr FitzSimons said there would be two groups of retailers applying for examinership: international chains that decide to cut their losses and exit the Irish market, using examinership to renegotiate parent company guarantees; and “the indigenous guys who are over-rented”.

The examinership process has the advantage of potentially allowing retailers to repudiate existing leases, allowing otherwise viable companies to survive.

“It’s tough for everyone, and we are going to see significant failure in the new year,” Mr FitzSimons said. Christmas trading has not fully kicked off, he added.

“Christmas starts this weekend. It certainly hasn’t started yet. From a consumer psychology point of view, there are still two weekends to go.”

Trading to date compares favourably to this time last year, when consumers postponed their shopping until the last minute because of an extended period of snow and ice.

Mr FitzSimons said the signs were that consumer sentiment would remain weak, keeping seasonal trading subdued.

“It’s not going to be great. We’ll marginally beat December 2010, because of the weather last year. We’ll come nowhere near to beating December 2009.”

Meanwhile, unions have asked for clarity from the joint administrators of Barratts and Priceless shoes after the appointment of an administrator to the firm for the second time in just over two years. The firm, which operates the Barratts and Priceless brands, has about 20 stores in the Republic.

Deloitte has said it is seeking buyers for the Bradford-based firm, which successfully exited administration in 2009, though this resulted in the closure of 220 of the company’s 380 UK stores.

Mandate’s Gerry Light said the union had requested further information from Deloitte on the impact the administration will have on workers in Ireland.