Store closures hit record levels in “testing” retail climate

Heightened restructuring activity has seen the first half of 2019 hit record levels in store closures on Britain’s high streets, according to research by the Local Data Company (LDC) and PwC.

In total, an average of 16 stores a day closed between January and June, as restructurings and the online migration of shopping and services continue to hit the high street, in what the LDC and PwC is calling a “testing” retail climate.

The first half of 2019 saw almost twice as many store closures as openings. In total, 1,634 stores opened and 2,868 stores closed over the period, leading to a net decline of 1,234 stores, compared with a net decline of 1,123 in the first half of 2018.

This marks the highest number of store closures since analysis by PwC and the Local Data Company began in 2010, with fashion retail continuing to be the hardest hit sector, with 10 stores a week closing, mainly as a result of high profile administrations, alongside CVAs and restructurings - particularly amongst major mid-market chains.

On a sector by sector basis, only 15 out of 96 sectors showed a net growth in store numbers, and all but two grew by only a single-digit number of outlets: takeaways with a net increase of 26 outlets, and sport and health clubs with a net increase of 17. Meanwhile, the biggest net declines were seen amongst fashion retailers (-118), restaurants (-103), estate agents (-100) and pubs (-96).

Lisa Hooker, consumer markets leader at PwC, said in a statement: “The record net decline in store numbers in the first half of 2019 shows that there’s been no let-up in the changing ways that people shop and the cost pressures affecting high street operators.

“While retailers need to keep investing to make sure their stores and propositions are relevant to today’s consumers, it’s also critical that all stakeholders find ways to ease the burden on operators, keep investing in the high street, and encourage new and different types of operators to fill vacant space.”

Fashion retail hardest hit by store closures in the first half of 2019

There was a slight increase in store openings in the first half of 2019 compared with last year (from 1,569 in 2018 to 1,634 in 2019), potentially indicating some “renewed optimism” amongst high street operators, added PwC. Interestingly, seven of the top ten sectors for store openings also featured amongst the top ten sectors for closures, such as fashion.

Hooker added: “The good news is that there are green shoots, as new entrants are entering even embattled sectors such as fashion. Our research tells us that consumers still want to spend their money in well located and invested stores and leisure venues on the high street.

“However, as consumers continue to change the way they shop and spend their leisure time, the reality is that we may need fewer high streets in the future. This opens up opportunities to repurpose high street space for other uses, while the remaining space evolves to meet consumer demand for convenience, choice and experience.”

Greater London saw the largest number of net closures across all the regions, although it was right at the national average (-1.8 percent) when taking into account its overall larger number of units.

The East Midlands, North East, South East and Yorkshire and the Humber were the only regions to see a reduction in their net closures between H1 2018 and H1 2019.

Lucy Stainton, head of retail and strategic partnerships at The Local Data Company, said: “One of the most striking things about this latest Local Data Company and PwC analysis is the level of market churn identified in such a short space of time. Whilst the overall net change number, a loss of 1,234 occupied units in only six months, is certainly significant, the level of openings and closures activity beneath this is hugely notable as the industry continues to re-set.

"In our experience, retailers are being much more cautious and risk-averse as far as both planning for new store openings and in making decisions across their existing property portfolios. The reality is that UK retail space will continue to look very different over the coming years, and this is demonstrated by the sheer number of stores opening and closing on an ongoing basis.”

The PwC and the LDC’s analysis tracked 66,352 outlets operated by multiple retailers in 500 town centres across the UK, between January 1 and June 30, 2019.

Image: FashionUnited