Baker Tilly: homewares retailers hit hardest by recession

Retailers in the homewares sector are suffering the most from the lack of economic growth, according to accountants Baker Tilly.

Baker Tilly has conducted its own analysis of administrations from the London Gazette following the Q2 2011 retail insolvency statistics released by The Insolvency Service this morning.

It found homewares businesses represent 37% of the total administrations in the quarter to 30 June 2011, up from 24% in Q2 2010. This is in spite of it being a time of year when the consumer typically spends on their homes.

High profile businesses, such as Carpetright, continue to report on the challenges the economic conditions are bringing, highlights Baker Tilly. Further evidence of the impact on the homewares channel is the news regarding Lombok closing half of its stores. 

Rupert Eastell, head of retail at Baker Tilly, said: “Consumers are having to make increasingly tough choices about how and where to spend their money. The harsh reality is most spending on homewares can be delayed or put off altogether. The only real success stories are where the retailer does a brilliant job with its customer service and product offer. Nothing less than the best will do in a competitive climate for a smaller pool of cash.”

Other findings from Baker Tilly’s analysis show how the ‘two speed’ economy is increasingly impacting upon businesses large and small. Over 65% of the retail business failures in the second quarter of 2011, an increase on the previous two quarters, were based outside of London and the South East, with the North West the worst affected region. This finding suggests weaker levels of consumer confidence overall in the North.    

Lindsey Cooper, restructuring and recovery partner at Baker Tilly in Manchester, said: “Whilst there are pockets of genuine growth and success around the country, the average business will find it harder to succeed outside of the more prosperous South and those selling products for the home will have to be even clearer in their proposition to the consumer. 

“Right across the sector, working capital will remain critical as top line sales are sought, often at the expense of profit.”