Peacocks hit as credit insurer cuts back cover for suppliers

Fashion chain insists affected suppliers account for small amount of stock

Peacocks, the fashion group, has become the latest large retailer to have its credit insurance slashed as insurers turn the screws on the retail sector.

In a letter written earlier this week, Euler Hermes, the UK's biggest trade credit insurer, said it was cutting the amount of insurance cover given to some suppliers that provide clothing to Peacocks by up to 90 per cent.

The revelation hammers home just how nervous credit insurers have become about providing cover to some of the UK's biggest retailers. In recent months, suppliers to store groups including the DSGi-owned electrical chains Currys and PC World, and fashion chains such as Whistles, backed by the stricken Icelandic investor Baugur, have had their insurance cover scaled back.

Richard Kirk, the chief executive of Peacocks Group, which includes the Peacocks and Bonmarché chains, confirmed the Euler Hermes letter, but said that it was not a Peacocks-specific issue. He said: "It is the wider clothing sector they [credit insurers] are withdrawing cover on."

Mr Kirk added that suppliers insured by trade credit insurers only accounted for a small amount of clothing sold by Peacocks. "A huge chunk of our business is done directly with suppliers," he said. Peacocks still trades with the suppliers in question. Euler Hermes declined to comment.

For the 12 months to 31 March 2008, Peacocks Group delivered an operating profit of £75m. Mr Kirk said Peacocks' sales were growing "strongly", despite the deteriorating consumer economy. He added: "Business is good. The last two weeks have been very strong. For the past six months, like-for-like sales and margins are positive."

Peacocks has 460 stores in the UK and 46 franchises in Turkey, the Middle East, Ukraine and Russia. It is understood that trade at Bonmarché – which has 370 stores and targets women wearing clothes sized between 12 and 24 – is robust, but not as buoyant as Peacocks, which has benefited from a younger customer base who often do not have mortgage commitments.

Mr Kirk said that Peacocks received a £20m boost in funding from two of its shareholders, the hedge funds Och Ziff and Perry Capital, last month to help fund its continuing expansion. The boost was a coup for Peacocks because its banks were reported to have been reluctant to continue financing the expansion. Och Ziff and Perry Capital each own about 25 per cent of Peacocks Group.

Over the past three years, Peacocks has opened about 30 stores a year and about 10 Bonmarché stores a year. Peacocks hopes to double the number of its UK stores over the next few years to more than 1,000.

Industry sources said that Mr Kirk and his team reckon the next six months will represent a "fantastic" opportunity for Peacocks to pick up store sites cheaply, as other retailers hit the buffers or sell off stores. Mr Kirk vehemently denied that Peacocks was looking to refinance the business. Peacocks Group was taken private in January 2006 in a £404m deal backed by Goldman Sachs, Perry Capital and Och Ziff.

While Peacocks remains unaffected by the action taken by Euler Hermes, the issue of credit insurers scaling back cover on suppliers is having huge ramifications for the retail sector.

In September, the UK's three leading insurers, Euler Hermes, Atradius and Coface, withdrew cover on Woolworths, which was a key factor in the pick 'n' mix retailer collapsing into administration last month. In September, Mattel, the world's largest toy manufacturer, stopped supplying the retailer with toys.

High street blues: November sales show sharp decline

*Retailers' worst fears about the depth of the consumer recession and their prospects for Christmas were realised yesterday with data revealing high street sales falling at their fastest rate for 14 years in November.

Underlying UK retail sales fell by 2.6 per cent in November, marking the first time since the British Retail Consortium-KPMG survey began in early 1995 that they had fallen for two consecutive months. The dire figures are despite hefty discounting throughout much of November and put down an ominous marker for what is expected to be one of the worst Christmas trading periods in living memory. In November 2007, like-for-like sales rose by 1.2 per cent.

Stephen Robertson, the BRC director general, said: "Retailers will be hoping that customers have been putting off Christmas shopping – not cancelling it."

Experian, the data specialist, said that overall footfall on the high street for the last weekend fell by 1.7 per cent, compared with the same weekend last year. He added: "The numbers speak for themselves – these are clearly tough times. Like-for-likes have now fallen in eight out of the last nine months." In November, total retail sales fell by 0.4 per cent.

While grocery sales grew in November, all other sectors posted declining sales. The BRC said that the year-on-year decline in clothing sales worsened further, hit by sharp falls in men's and women's fashion.

Retailers of big-ticket items, including furniture, electricals and homewares, also continue to struggle. Helen Dickinson, the head of retail at KPMG, said: "There is no doubt that Christmas will arrive late for many retailers, leaving them with a nerve-racking couple of weeks to come." She warned that the November sales data may have been affected by consumers delaying purchases until retailers had implemented the 2.5 per cent cut in VAT unveiled on 24 November.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence