Hard Times for Commercial Properties in Retail

Posted on 12 September, 2011 by MOVEHUT

Many businesses around the UK have been forced to close their commercial properties as they struggle with low sales.But is it just small businesses which are struggling or are we about to see major brands slowly disappear from our High Streets and shopping centres for good? Movehut investigates.

Dixons, the electrical goods company is struggling with sales, as they fell seven per cent in the last three months, when compared to the same time last year. Although the company is suffering with slow sales, they have no plans as yet to close any of their commercial properties.  John Browett, Chief Executive of Dixons expressed that the company had, “Outperformed its competitors during the quarter” and had “exited the period in good shape.”

Another organisation which has reported a drop in recent sales is Home Retail Group, who owns Argos and Homebase. The first half of this year saw the sales fall 8.6 per cent at Argos and the fall of 3.1 per cent at Homebase, when compared to the same period last year. This resulted in over £1 billion worth of losses for the company as a whole. Terry Duddy, Chief Executive stated, “Argos’ sales continued to be impacted by the decline in the consumer electronics market, while at Homebase, after a good first quarter which saw strong seasonal sales, the second quarter was more challenging.”

However, even with the drop in sales for Home Retail Group, their share price did increase by roughly ten per cent. Keith Bowman, a Stockbroker reported, “Pressure on the group’s low-income customer base shows no sign of abating, while moves over recent years by the supermarkets into the electrical arena have arguably increased over-capacity.”

The chocolate maker, Thorntons can be added to the list of retailers that have been struggling this year.  The company reported a profit of £4.4 million in June last year, but this year they saw a loss £253,000. The main reason for this loss was due to lease payments on closed commercial properties. If the company didn’t have these expenses, they would have made a profit of £4.2 million this year so far.

Thorntons plan to shut 180 commercial properties by 2014, but with the lease payments still payable on the vacant commercial properties, could this hinder their sales margin for the future years?

So what are the main factors, which are affecting consumer spending? Stephen Robertson, Director General of the British Retail Consortium (BRC) believes, “Poor consumer confidence, high inflation and the ongoing squeeze on personal finances remain the biggest threats to the retail sector.”

But why was August a particularly bad month for sales? Stephen Robertson put forward that, “Good weather at the beginning of August provided a boost to sales, but did not last long enough to make a meaningful uplift for the month as a whole.” He went onto say, “The retail sector’s performance for August has been essentially flat, particularly bearing in mind the increase in VAT, which will be responsible for some of the growth in spending.”

 




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