Retail turnaround opportunities abound in 2012

The number of retailers that have fallen into administration in the past year, including some major high street names, has increased significantly.

These businesses offer opportunities to buyers looking to take on a challenge and turn around a retail business in 2012. Just this week, Lou D’Ambrosio, the chief executive of Sears Holdings in the US has been giving advice on retail turnarounds. He claims success is all about “Knowing what our customers want to buy and how and then delivering that across platforms.” It seems that having ready cash to invest in stores and into an enhanced online presence is essential in these increasingly e-commerce led times.

Turnaround advisers, such as Alvaraz, are taking on staff in preparation for what they expect to be a busy few months ahead as buyers line up to take on distressed retailers, and there are certainly plenty to choose from. Research from business advisory giant Deloitte, found the number of retail administrations in the final quarter of 2011 rose by 27 per cent from the previous quarter. A total of 42 retail businesses fell into administration between October and the end of December, which included the usually lucrative Christmas period. This shows that if a strategy isn’t working, not even the festive period will bring in the customers.

Among those who are still seeing strong sales is John Lewis, which reported an 11.4 per cent jump in the week to 21 January to total £55.6 million. Again, it was online that drove this increase, with a 47.4 per cent surge, led by consumer appetite for clothing and electronics, all of which were discounted in their January sale of course. These figures are another indicator that buying a retailer with the potential for a strong online presence is a wise strategy when embarking on a turnaround.

Among the firms that failed last year were some well-known brands that offer some attractive opportunities to buyers. Lee Manning, a restructuring services partner at Deloitte, explained: “What stands out in 2011 is the significant increase in household name retailers that have gone into administration including: Barratts, Oddbins, Jane Norman, TJ Hughes, Habitat and Homeform.”

It’s easy to see that from the perspective of someone interested in buying a retail business, there is a huge amount of potential in these latest administrations. Although Deloitte’s Consumer Tracker survey claims that household income has fallen for one in five households, this will pick up when the economy starts to recover and unemployment begins to shrink. In the meantime, Deloitte expects the number of administration within the retail sector to continue to grow, at least in the first part of 2012. In fact, we have already seen household names like Peacocks and Past Times join the list of failed retailers since the beginning of the year.

Despite the current gloom, those who do take steps towards making a purchase of a retail chain, or even a single unit, in the coming year will be pleased to hear that experts expect there to be some increase in consumer confidence over the coming months. This is expected to be sparked by falling inflation rates. Prices are also low at the moment, in light of the fact that retail conditions are among the toughest they have been since the economic crisis began. However, buyers who go into deals with their eyes open and a strong financial position can still do well if they position themselves to make the most of any market upturns.

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