K2 Business Rescue asked in a pre-Christmas blog whether January would see a rise of retail insolvencies given the December 25 quarter day rent falling due.
It may be too early to expect a flood but today’s announcement that the High Street camera chain Jessups has gone into administration with PWC as appointed administrators may be first sign.
Jessups, which in 2009 managed to avoid administration by arranging a debt for equity swap with lender HSBC, saw a significant decline in market share throughout 2012.
The company has 192 UK stores employing around 2,000 people and the administrators have said that inevitably some stores will have to close given the current ongoing economic crisis.
Despite the balance sheet restructuring in 2009, Jessups is an example of a company that did not change its business model. As a long established retailer they continued to rely on high street sales while its market and customers buying behaviour changed.
Financial restructuring rarely works unless it is part of a strategic review which normally results in a change of business model and an associated operational reorganisation.
The question is if companies that are currently hanging on by their fingernails do not take action and call in an experienced rescue and turnaround practitioner who will be next?