Suddenly the problems Wesfarmers is having with its Homebase purchase in the UK don’t look as isolated as they did when the company confirmed $A1 billion in write downs and losses last month.
UK retailing, like that in Australia and parts of the UK is suffering the blues big time as debt ladened and income poor consumers haul back on spending, and in the case of the UK, the ongoing brexit debacle belts consumer confidence and boosts inflation.
Two major UK chains – Toys R Us and Maplin, an electronics retailer, collapsed on Wednesday with more than 5,500 jobs at risk.
On top of this three other chains – Carpetright, a floor covering a bedding group, the Italian themed restaurant chain, Prezzo and New Look, a clothing group, revealed problems, losses, job losses and store closures.
After slashing its earnings forecast in January, Carpetright says it’s now expecting to make a loss in the year to April, hit by unexpectedly weak conditions in its key UK market.
The January warning said 2017-18 its profits would be far below its previous guidance, an admission that saw a 50% slide in the share price. Now it says it’s on track for a “small underlying pre-tax loss” in the year to April, after a “difficult” start to 2018 characterised by “weak consumer confidence” in the UK.
Prezzo, the Italian-themed casual dining chain, said it was restructuring its business with the loss of several hundred jobs and the closure of more than 100 outlets.
And clothing group, New Look, wants its bondholders to agree to a possible restructuring that would involve closing scores of its 600 stores, according a report in the Financial Times.
Maplin, owned by private equity group, Rutland Partners – had put the business up for sale, but talks with a potential buyer collapsed and the chain was placed in administration in Wednesday, with 2,500 jobs at risk several hours after Toys R us fell over, putting at risk another 3,000 jobs.
Toys R Us was also seeking a possible sale but failed to secure a buyer. The toy chain in the UK – whose US owner filed for bankruptcy protection last September – is facing an imminent deadline for a £15 million value added tax bill which it can’t neet without selling the business. Now it can’t meet it because it is in administration. The company had been planning to cut 26 UK outlets in the next couple of months as part of a rescue plan, but the tax bill blew that idea apart.
Other chains have been reporting falling sales and weak consumer traffic. No sector seems to be exempt, from food to clothing, electronics, homewares and hardware.
