The popular retailers that could be in trouble in 2025 as the high street faces more pain due to Budget changes
JANUARY is a tricky time for retailers.
For those that are struggling, whether they survive or thrive depends on how much cash came in the tills over the festive season.
If sales were disappointing or their profits came under pressure by having to offer bigger discounts than expected it’s likely they’ll be facing a bleak January.
The problem retailers face is a wall of extra costs that are coming down the tracks that will make troubled shops’ chances of survival even slimmer.
The first blow will come from higher business rates bills.
While the government has promised to reform the heavily criticised property tax, any changes won’t be until 2026.
That means retailers will face higher bills this year with the average shop business rates bill spiralling from £3,589 to £8,613 in April, according to real estate experts at Altus.
Employees are one of the biggest costs for a retail chain and the Budget’s changes to national insurance contributions has made them much more expensive.
Part-time workers, which the retail sector relies heavily on, will be dragged into higher national insurance contributions.
As a result, many retailers will have to cut costs even further through store closures, brand shutdowns and shrinking staff numbers.
Some retail names are more vulnerable than others according to restructuring experts.
Quiz
The fashion chain has been struggling for many years but its recent warnings that cash might run out has put it top of the troubled list.
The retailer, best known for it women’s party fashion ranges, warned at the start of December that a “significant reduction in revenues” could lead it to running out of cash in the new year.
Quiz has already called in advisers as it said it expects additional funding will be needed in the first quarter of 2025 and warned it might not be able to continue as a “going concern”.
The business has already gone through one restructuring in 2020 and renegotiated its rents as lockdowns damaged retailers.
The company halved in value since the start of December shortly before delisting from the stock market to save costs its value had shrank to just £3.6 million.
Advisers at Interpath are now trying to work on how to solve the growing crisis at the firm.
ShoeZone
The shoe chain that has built its reputation on selling affordable shoes has been one of the first retailers to blame the Chancellor’s Budget for store closures.
The business, which has 297 shops across the UK with 2,250 employees, said that the tax raid on business and extra costs would result in “the planned closure of a number of stores that have now become unviable”.
Shoe Zone did not reveal how many stores would be shut but halved its forecasts for the year from £10 million to £5 million.
The retailer will be under pressure to give more details at its next results on 21 January.
Asos
The online retailer had been a pandemic darling as shop closures during lockdowns forced the switch of shoppers to the internet.
The problem was the fashion retailer thought this growth spurt would last forever and spent millions expanding internationally and buying Topshop from the bust Arcadia Group.
Since pandemic restrictions lifted Asos has had a bruising time and its market value has crashed by almost 90% since its peak in 2021.
Asos is now worth just £450 million and it has had to sell off a majority stake in Topshop to raise cash and secure an expensive loan facility with high interest costs from Bantry Bay.
With interest rates staying higher for longer and its sales still sliding, Asos will be under even greater pressure this year.
The retailer will update investors on 22 January.
Boohoo
Boohoo has been another online retailer that has come undone since lockdowns were lifted.
To save costs it has shut its expensive warehouse in the US and cut jobs at its Manchester headquarters and sold its London office.
It is also facing a battle with its biggest investor Mike Ashley, the Sports Direct billionaire.
Boohoo is now considering a break-up of the business which could see brands such as Pretty Little Thing, Dorothy Perkins and Nasty Gal separated.
It usually gives an update to investors on how it has performed over the crucial Christmas season, which would be one of the first City outings for new chief executive Dan Finley.
However, it has yet to confirm the timings of its trading update.
Why are so many retailers closing?
EMPTY shops have become an eyesore on many British high streets and are often symbolic of a town centre’s decline.
The Sun’s business editor Ashley Armstrong explains why so many retailers are shutting their doors.
In many cases, retailers are shutting stores because they are no longer the money-makers they once were because of the rise of online shopping.
Falling store sales and rising staff costs have made it even more expensive for shops to stay open. In some cases, retailers are shutting a store and reopening a new shop at the other end of a high street to reflect how a town has changed.
The problem is that when a big shop closes, footfall falls across the local high street, which puts more shops at risk of closing.
Retail parks are increasingly popular with shoppers, who want to be able to get easy, free parking at a time when local councils have hiked parking charges in towns.
Many retailers including Next and Marks & Spencer have been shutting stores on the high street and taking bigger stores in better-performing retail parks instead.
Boss Stuart Machin recently said that when it relocated a tired store in Chesterfield to a new big store in a retail park half a mile away, its sales in the area rose by 103 per cent.
In some cases, stores have been shut when a retailer goes bust, as in the case of Wilko, Debenhams Topshop, Dorothy Perkins and Paperchase to name a few.
What’s increasingly common is when a chain goes bust a rival retailer or private equity firm snaps up the intellectual property rights so they can own the brand and sell it online.
They may go on to open a handful of stores if there is customer demand, but there are rarely ever as many stores or in the same places.
Retail price hikes
To make it through the difficult retail environment some stores will be forced to hike up prices.
Two-thirds of retailers have already warned that they will be forced to push up prices to cope.
The boss of M&S said the supermarket would have to pass on extra costs due to the National Insurance and minimum wage hikes.
Meanwhile, Sainsbury’s warned that the Budget would cost it an extra £140million.
Its CEO Simon Roberts last week warned that the chain would need to work with its suppliers to minimise the impact on customers.
He told The Grocer: “Suppliers have got costs coming at them as well, of course, given all of the changes in National Insurance coming.
“We’ll be working really closely to make sure that between us, we find the best answers we can and we continue to give customers the best value that we possibly can.”
Meanwhile, Tesco boss Ken Murphy promised to protect customers against the looming economic challenges.
High street fashion giant Next has also warned that its cost will increase by £67million, some of which it will be forced to pass on to shoppers.
RETAIL PAIN IN 2025
Chief consumer reporter James Flanders explains what could happen to retailers this year.
THE Centre for Retail Research (CRR) has also warned that around 17,350 retail sites are expected to shut down this year.
It comes on the back of a tough 2024 when 13,000 shops closed their doors for good, already a 28% increase on the previous year.
Professor Joshua Bamfield, director of the CRR said: “The results for 2024 show that although the outcomes for store closures overall were not as poor as in either 2020 or 2022, they are still disconcerting, with worse set to come in 2025.”
It comes after almost 170,000 retail workers lost their jobs in 2024.
End-of-year figures compiled by the Centre for Retail Research showed the number of job losses spiked amid the collapse of major chains such as Homebase and Ted Baker.
It said its latest analysis showed that a total of 169,395 retail jobs were lost in the 2024 calendar year to date.
This was up 49,990 – an increase of 41.9% – compared with 2023.
It is the highest annual reading since more than 200,000 jobs were lost in 2020 in the aftermath of the COVID-19 pandemic, which forced retailers to shut their stores during lockdowns.
The centre said 38 major retailers went into administration in 2024, including household names such as Lloyds Pharmacy, Homebase, The Body Shop, Carpetright and Ted Baker.
Around a third of all retail job losses in 2024, 33% or 55,914 in total, resulted from administrations.
Experts have said small high street shops could face a particularly challenging 2025 because of Budget tax and wage changes.
Professor Bamfield has warned of a bleak outlook for 2025, predicting that as many as 202,000 jobs could be lost in the sector.
“By increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020.”