Although the recession may be over, and the retail industry gradually recovering from one of the worst downturns in living memory, there is no guarantee of financial security for retailers in the increasingly competitive 21st century. Home furnishings retailer Paul Simon has this week found this out the hard way, with a number of unfortunate events over the past year forcing the brand into liquidation.
Paul Simon entered administration last Wednesday, after severe flooding in February took a severe toll on the brand’s commercial properties and finances. However, as administrator Deloitte failed to find a buyer for the stricken brand, it has been announced that the remaining 22 operational stores within the retailer’s portfolio will enter a period of phased closure, expected to culminate in mid-June.
Lead administrator and Deloitte partner, Lee Manning, confirmed that the closures will result in a total of 209 job losses.
He continued; “The sector in which Paul Simon operates remains a challenging market.
“Loss making stores with excessive rents, a complicated delivery model for relatively modest transaction sizes and financing problems combined to reduce the ongoing viability of the enterprise.
“This ultimately led to the appointment of administrators and restricted the level of interest from potential purchasers.”
Although the business model may have left much to be desired, as indicated by Mr Manning’s statement, the closure of Paul Simon is somewhat surprising as it specialised in an area frequently outperforming the majority of sectors in the retail industry. Paul Simon sold curtains, carpets, sofas, beds and blinds – all products which have contributed to a boom in sales within the home improvements sector of late.
In part, this boom has been fuelled by the government’s Help to Buy deal for first time buyers on the residential property ladder, but the improvements within the economy have also encouraged homeowners to invest in the maintenance and interior decoration of their properties. This has seen retailers such as Dunelm Mill posting the most encouraging annual reports seen in several years, although it has also fuelled competition within the sector – perhaps leading to Paul Simon’s downfall.
What retailers must take from this example, then, is that while the conditions within the retail industry may be improving it remains hugely important to keep a close eye on the bottom line. If a retailer with more than 23 years of trading experience, operating primarily within the affluent South East region of the UK, can face the issues which ultimately caused Paul Simon’s downfall, it is abundantly clear that the end of the recession does not necessarily signal a new era of security for smaller retailers.
Had Paul Simon focused upon simplifying its delivery model and negotiating better rent deals with landlords, perhaps the situation it now finds itself in could have been avoided. Unfortunately, with severe financial difficulties standing in the way of a potential recovery and no buyer in sight, it seems that this is yet another brand set to exit the high street for good.
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