Retailers sound alarm bells after one of toughest Christmas periods on record

Kasmira Jefford
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Begbies Traynor said retailers caught a chill this Christmas with a rise in companies suffering "significant" distress (Source: Getty)

UK retailers have suffered one of their worst Christmas trading periods on record, according to new research showing a surge in the number of companies struggling to make ends meet.

Turnaround specialist Begbies Traynor said 26,013 UK retailers entered the year in significant financial distress – nearly double the amount recorded in the fourth quarter of 2012 and 17 per cent more than the same period last year.

On a quarterly basis alone, levels of significant distress among UK retailers were up nine per cent from 23,889 companies in the traditionally quieter third quarter trading period, the company’s Red Flag research showed.

“With the only real growth among the UK’s listed retailers now coming from online sales, this Christmas trading period seems to mark the death knell for the high street retail model as we know it,” Julie Palmer, a partner and retail director, said in a stark warning.

“We all knew this day was coming, but the speed of the transition online has been much faster and more severe than most in the industry had expected,” she added.

High street stalwarts Marks & Spencer and Next have both reported tough trading this Christmas, as the warm weather and high levels of discounting took its toll on sales across the sector.

Even John Lewis, which bucked the trend to post relatively strong Christmas figures, acknowledged that it had struggled with lower footfall, with in-store sales down 1.2 per cent. Most of Britain's biggest retailers have built strong digital businesses to support their stores and prepare them for changing shopping habits. But Palmer warned that those smaller business that haven't will struggle to survive.

"With the likes of Amazon and eBay going from strength to strength, 2016 will be a crucial year for retailers to establish themselves in the online battleground. Expect to see a huge surge in investment from retailers this year in e-commerce and mobile propositions...For those that don’t, it seems increasingly unlikely that they will still be profitable or even trading at this time next year,” she said.

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