COVID-19: Purely to blame for retail insolvencies?

COVID-19: Purely to blame for retail insolvencies?

Victoria’s Secret and Monsoon Accessorize are just two of the latest retailers to fall victim to COVID-19.

A nationwide lockdown, combined with changing consumer habits and tastes, increased competition from online retailers and rising costs have all piled pressure onto businesses over the last few months. However, is the pandemic alone to blame for this increase in insolvencies?

In short, the answer is no. COVID-19 isn't primarily to blame, but it is the straw that broke the camel’s back for many.

Victoria’s Secret

The 25 stores of Victoria’s Secret UK had been struggling financially long before the pandemic hit, with falling sales and store closures. In recent times, it has become detached from consumers and last year cancelled its once-famous international fashion show.

Nevertheless, the retailer can still have a future on the UK high street. A streamlined business could survive if it adapts to changing consumer habits and renegotiates more favourable lease terms with landlords. However, there are unlikely to be more than a handful of flagship stores. It is a damaged brand and has been criticised for not catering for more diverse body types and for failing to embrace body positivity.

Although Victoria’s Secret did make some changes with its models and styles, it was too little too late, as customers had already turned their backs on the brand that had simply failed to reinvent itself.

For the company’s UK branch, the separate online business holds the key to future success.

Monsoon Accessorize

As a legacy retail group with significant overheads, it’s little surprise that Monsoon Accessorize has collapsed under COVID-19’s tough trading conditions.

Coming just 12 months after it won support from creditors to close stores and slash rents in a CVA, administration was the only logical option to try and save the business and jobs. However, despite being bought back in a pre-pack deal by its founder, the futures of over 500 staff and dozens of stores are now on the line if discussions with landlords don’t go well.

With a recession looming, Monsoon Accessorize’s failure should be a bitter wake-up call for the sector, reinforcing the urgent need for a longer-term solution to its enduring struggle.

While Government support may provide a lifeline for those solely affected by the pandemic, it can only go so far. Ultimately, it’s unlikely to be enough to bail out those with deeper-rooted financial issues.

To save retail, efforts should be focused on areas such as repurposing physical retail space, for example, introducing additional services in stores, transforming unoccupied units into residential areas and taking advantage of innovations in experiential retail. Without this level of revitalisation, it will be difficult to slow the domino effect of closing High Street stores.

We’re by your side when things get tough

If your business is experiencing financial difficulties, and you’re concerned about the future, then speak to a member of your local corporate, restructuring and insolvency team.

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

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