Struggling retailer Peacocks has been saved from corporate insolvency after it was sold to Edinburgh by administrators KPMG.
The clothes firm had run into difficulties in the recession and its aftermath as it battled to meet the challenge of an increasingly tough trading environment as squeezed consumers reduced their spending, particularly on discretionary items.
KPMG have, however, been able to save the brand along with 388 stores and its concessions, keeping 6,000 employees in work.
But the story is not all good news, with 224 stores having to close with immediate effect making 3,100 people redundant, while another 16 jobs are to go at the company’s headquarters in Cardiff.
Joint administrator Chris Laverty remarked: “Today’s deal ensures the continued trading of a well known name on the high street. While it is unfortunate that redundancies have been necessary, we are pleased that we have been able to preserve the majority of the business and jobs.”
He observed that the company had slipped into trouble because of “a decline in consumer spending due to the tough economic conditions” combined with “a surplus of stores and unsustainable capital structure”.
The deal is not the only recent case of a struggling retailer being sold to a rival, with other examples including Blacks, the outdoor goods store sold to JD Sports in a pre-pack deal in which only its assets such as stores and stock – and none of its shares – were sold on.
Research by the Office for National Statistics produced this week have laid bare the way spending habits changed among consumers in the 2008-09 recession and in its aftermath.
It found that spending on purchases of non-essentials fell by nine per cent between the first quarter of 2008 and the second quarter of 2009, while essential spending was trimmed by three per cent.
And many areas of spending saw a slump except when major discounts were on offer, an example being that of car sales, which dropped by 25 per cent until the 2009 vehicle scrappage scheme led to a sudden surge.
But discounting by retailers affects profits and is therefore of limited benefit. It may retain some sales volume, but loses value.
For these reasons, it may be that several more major retailers will go into administration before the economy displays signs of rude health again.