Anthony Hilton: Comet might be the only casualty this Christmas, but watch out next year
This country still has far too many shops unless the economy recovers dramatically
Saturday 01 December 2012
When Woolworths went bust at this time back in 2008 the word went out from Government to the big four banks that it did not want any more high-profile retail bankruptcies and that it particularly did not want them just before Christmas. In fact it was American asset-based lenders whose loans were secured against the stock on the counters of the retailer who in fact pulled the plug, not the banks, but the point was nevertheless made. Being already in much more deeply than they intended, the lenders refused to give the chain the additional money it needed to stock up for Christmas, and that spelled the end.
The embargo on Christmas closures has held for four years but has been emphatically breached this time with the bankruptcy of Comet, the electrical retailer which for many years sat alongside Woolworths in the Kingfisher group. Hard to believe now, with only B&Q of the trio still standing, that Kingfisher was feted for many years as a stock market darling. But nothing stays the same for long in the High Street.
Comet is in many ways a re-run of the Woolworth story in that it has been struggling for years, its format is out of its time, and it has become ever more dependent on short-term finance to be able even to open its doors.
Sad as it is for those who work there, no one should be surprised at its demise. We all shop online. We all know we can go into a Comet store, choose what we like and then go home to buy it more cheaply on the internet, with the added advantage that it will be delivered to our home and we will be spared some hapless salesman trying to sell an extended guarantee.
If there is a surprise in this, it is not that Comet has run out of money, but that it is the only pre-Christmas casualty, when there are so many other candidates in our over-populated retail sector which seem similarly poised to fail because they cannot afford to stock up for Christmas. However the silence is deceptive. The banks took the Government's warnings of four years ago to heart and gave a lot of the weakest retail candidates fairly generous loan extensions to see them into 2014.
Those with a macabre turn of mind find it easy to spot the ones who will struggle then. Look for businesses which not so long ago offered decent understated products at premium prices in dull surroundings but which now have brash displays of quite shoddy goods – the kind which previously would not have been found in that particular chain. These are to generate cash flow... and a sure sign of stress. Ironically, unstaffed tills are another sign.
Given the changes in shopper habits, this country still has far too many shops unless the economy improves dramatically and shopper confidence returns to pre-crash levels. Comet may be the only retailer to fail this Christmas. Next year could be much bleaker.
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