Retail ruins: how to avoid the administration trap

Retail ruins: how to avoid the administration trap

Opening up its first UK outlet in 1985, Toys R Us once provided a haven of excitement and magic for children the world over.  Who could forget their iconic TV ads in the run-up to Christmas, or their huge superstores filled with cheerful staff demonstrating the latest ‘must-have’ toys?

It was sad news, therefore, when over the past six weeks the media reported that the UK arm of Toys R Us, along with electronics firm Maplin and high street clothing retailer East, had fallen into administration, in the process putting thousands of jobs at risk. This is in addition to other prominent names such as Marks and Spencer’s and New Look seeking help to reduce costs from landlords and closing stores.

The ongoing decline of the High Street

Sad news indeed, yet not particularly shocking when we consider the mounting issues retailers face in today’s uncertain world.

One fact remains certain however: high street footfall is in decline, as retail costs are on the rise.

Shoppers are increasingly migrating to the internet for essential and everyday purchases alike (related news reports focused on interviewing everyday shoppers, who commented that “pretty much everything can be bought cheaply on Amazon these days, and they deliver quickly”).  Undoubtedly, online retailers and in-home restaurant deliveries are flourishing as the High Street closes its doors.

The tough economic conditions wrought by Brexit are also having a profound effect on post-Christmas trading figures.  The pound has fallen to multi-year lows since 2016, resulting in higher import costs combined with lower wages and limited spending power.   Expert commentators have noted that it is unlikely Toys R Us and Maplin will be the last of the major High Street casualties we will witness in the coming months.

Respond to issues before they take over

While an obvious lack of customers queuing at the till points should have been more than enough to limit investment in physical retail space and recruitment of additional staff, clear and regular management reporting processes are worth their weight in gold.

Figures tell stories just as well as words, and robust reporting will highlight potential issues as they begin to arise, giving organisations a fundamental chance to act before such issues wreak potentially disastrous effects.

As a business owner, you may decide to respond by improving performance, changing your business structure, innovating business methods, or seeking additional finance while it is still viable to do so.

Conduct a reporting systems review

An excellent starting point, any business will benefit from a thorough analysis of its reporting systems.  This will highlight operational knowledge gaps, ensuring the reports generated are both relevant and accurate.

Rickard Luckin’s expert Business Services team specialise in reporting systems reviews, along with preparation of management accounts that have been recognised by banking organisations for their detail and accuracy.

For further information or to request an appointment, please contact us.

Mark Brooks

Audit and Accounts Manager