Thousands of UK fashion retailers are exhibiting early warning signs that they are at risk of going insolvent, new research has found.
According to accountancy firm Moore Stephens, 6,580 (19%) of the 35,078 fashion retailers analysed are showing signs of financial distress, which include a large fall in revenue and poor payment history.
Last month, East was the latest high profile fashion retailer to enter insolvency, following on from Jaeger and Store Twenty One in the past 12 months.
Over the last month, Debenhams was forced to issue a profits warning after poor Christmas trading and House of Fraser has entered negotiations on store rents in an attempt to reduce its costs.
Jeremy Willmont, head of Restructuring and Insolvency at Moore Stephens, said: “Clothing retailers have faced some of the most difficult trading conditions since the recession in the past year.
“Fashion retailers have been hit by the perfect storm of rising costs, falling consumer spending and increased competition. All three have heaped pressure onto revenue and made profit margins difficult to maintain.
“The increasing popularity of online-only retailers, who have more manageable bills for business rates and lower payroll, means that many fashion retailers will need to improve their ‘bricks and clicks’ offering if they are to thrive.
“Businesses that are able to adapt to changing trends and preferences will put themselves in a much better position to not only avoid insolvency, but to flourish.”