Tension amongst the region’s retailers will intensify this week as firms prepare for quarter day rental payments for the last time this year, according to a business restructuring expert at accountancy and business advisory firm BDO LLP in Southampton.
Quarter day – when many retailers pay three months’ rent in advance to landlords – is often the tipping point for insolvency. Previous quarter days have seen the likes of Habitat, Jane Norman and TJ Hughes enter administration.
Despite the recent story of JJB’s administration, BDO Southampton’s Business Restructuring Director David Smithson expects to see less high street bloodshed on the Autumn quarter day, which lands on Saturday 29 September.
Smithson says: “While some retailers have moved to monthly payments, the quarter day still remains a hurdle for many companies’ cash flow.
“Retailers have had another tough and testing year, and Q4 sales and the January sales are critical for the vast majority. They have a hard task in finding ways to encourage people to spend money with them rather than their rivals, and this comes down to offering them what they want, new products and value underpinned by superior service.”
But they are not alone. Landlords are suffering too and, with rising vacancies and a rush of lease expiries imminent over the next two years, they need to keep hold of their tenants.
“Another round of high profile CVAs or administrations is the last thing the retail sector needs. Both tenants and landlords will be keen to make the most of the lucrative run up to Christmas and convert stock into cash, in the hope that even the most cash-strapped of consumers will be hitting the shops,” adds Smithson.
Saturday’s quarter day is also expected to result in landlords and tenants at loggerheads, as the two clash over the matter of paying quarterly rates in advance. The issue of switching to a pay-monthly basis is an on-going debate, which is still without resolve for many.
Smithson continues: “Given the current trading environment and enlarged vacancy rates, negotiations are likely to come to a head. Retailers will be calling for more flexible arrangements that will not only be in the interest of the high street but for landlords too who cannot afford to see more retail space on the market.”
