Proshare - Facebook Proshare - Twitter Proshare - Google+ Proshare - Linked In Proshare - RSS Feed

More Pressure on UK Retailers in 2018 Than European Peers

Proshare

Tuesday, March 20, 2018 /01:22 PM / Fitch Ratings 

The near-term outlook is more perilous for traditional UK retailers than for their continental peers, Fitch Ratings says. This is due to a weaker consumer environment, Brexit uncertainty, structural shifts in the UK economy, higher leverage and fierce online competition, which has already contributed to the demise of several retailers in the UK, most recently Maplin and Toys R Us.
 

UK traditional retailers' market share is challenged by online sales that continue to grow strongly, adding to costs as they invest in online platforms and logistics to compete. Those risks are magnified for highly leveraged companies as they are attempting to implement turnarounds in a weak market environment and with limited capacity to invest in technology and store revamps.
 

The approach of Brexit has further exacerbated the woes of UK market participants as consumer spending is tempered by a household income squeeze, while the weaker pound puts pressure on margins. In addition, retail overcapacity is greater in the UK - gross leasable area in UK shopping centres is more than 50% higher than in Germany, despite the UK's smaller population.
 

The picture for continental peers looks brighter, with better sales growth, fewer highly leveraged chains, and significantly lower online sales penetration. This limits current competitive pressures, but leaves potential for greater disruption in the medium term. Online sales in the UK are nearly double the average across Europe, and competitive pressures may become more intense for non-UK retailers if the differences in online penetration start to narrow.
 

However, there is little indication of this happening significantly across Europe in the near term. Online penetration will remain higher in the UK for some time, particularly as the UK's greater population density reduces logistics challenges and costs compared to markets such as France, Spain and Italy.
 

Related News

  1. Brexit Transition Agreed Between UK and EU
  2. The UK’S Local Credit Finance Scheme
  3. National Liquidity Approaches Challenge EU Banking Union
  4. Global Growth Is Booming, Central Banks Turning Less Cautious
  5. China''s Latest Bank Regs May Support Debt Resolution
  6. Low Macro-Prudential Risk in Record Number of Markets; Bottom of Global Credit Growth Cycle
  7. Egypt Rate Cut Made Possible by Macro Stabilisation
  8. Online Banks Gain U.S. Deposit Share as Branch Banks Keep Rates Low
  9. Reality Bites on Interest Rates for Global Economy
READ MORE:
Related News