Retailers await crucial vote by SRG creditors

Suits You owner hopes for vital company voluntary arrangement endorsement
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Britain's retailers are holding their breath ahead of crucial week for the sector, as mixed trading continued in the second month of the year after the snowfall gave many store groups a January to forget.

While the discount clothing retailer Primark will today provide in its interim trading statement further evidence of its continued growth , it is the vote on Speciality Retail Group's (SRG) company voluntary arrangement (CVA) tomorrow that will have wider significance for a host of struggling chains.

The fear is that if the CVA for SRG – the company behind the Suits You, Racing Green and Young's brands – fails, it will close the door on their being able to follow suit, although the retailer is thought to have been buoyed by the response from most landlords. SRG requires 75 per cent of its creditors to vote for the CVA, an insolvency procedure that will enable it to slash its property costs and stave off becoming the latest high-street chain to hit the buffers.

If SRG's creditors approve the CVA, none of the 71 stores will be closed immediately and staff will keep their jobs. The retailer has proposed that landlords of 42 loss-making stores will be offered 60 per cent of the full-rent for a period of 18 months after which time they will close. If the landlords wish to take on new tenants, they can do this by simply giving 45 days' notice.

The accountancy firm KPMG, the supervisor of the procedure for SRG, carried out 8 CVAs in 2009, including for Blacks Leisure, Focus DIY and JJB Sports, and has forecast its workload will double to about 16 this year.

But there are signs that the property industry and stable retailers are getting increasingly angry about weaker players getting hefty concessions. The alternative to a CVA is, however, often a full-blown administration and redundancy on a large scale.

SRG's CVA comes at a testing times for the nation's shopkeepers. The UK's biggest chains, from the DIY market leader B&Q to the grocer Asda, have conceded that the snowy and icy conditions hit trade in January.

Last week, Andy Bond, the chief executive of Asda, cited the growing pressure on household budgets this year, including rising petrol and the hike in VAT to 17.5 per cent on 1 January. He said: "There is no good news to make people feel good so I think sentiment is dropping. I am really quite nervous for this year for consumers."

Retailers are also wary of a further hike in VAT and public-sector job losses after the general election. However, for some of the sector's long-term sickly patients, the dire weather was the final nail in their coffin.

Both the discount fashion retailer Ethel Austin and the owner of Adams, the kidswear chain, collapsed into administration, although rescue deals for smaller chains going forward could emerge as soon as this week.

While industry data and financial results have pointed to mixed trading so far in 2010 – a year that many retailers expect to be a long, hard slog – recent data have provided a few rays of hope ahead of a crucial period of trading in the build up to Easter.

John Lewis, the department store, which has enjoyed buoyant trading for months, said that sales jumped by 12.5 per cent in the week to 13 February.

On Friday, the accountancy firm BDO said that total sales for mid-sized retailers rose by 6.7 per cent for the week ending 14 February, driven by strong sales from fashion retailers.

It said that fashion chains delivered 9.9 per cent sales growth over the week, as consumers responded positively to new brands and ranges for spring, with womenswear being the star performer. Retailers of homewares also celebrated a 4.4 per cent uplift in sales.

But the picture was less rosy for non-fashion stores, where sales only inched into positive territory by 0.4 per cent.

Don Williams, the head of retail at BDO, said: "The weather this week has also been bad, but that has not prevented shoppers from pushing sales figures up for the second consecutive week. Surprisingly though, Valentine's Day did not provide its usual guaranteed sales uplift."