Camera retailer Jessops has called in administrators to its property arm, putting 500 jobs at risk.
The business, which is controlled by Dragons’ Den panellist Peter Jones, has been considering a restructure for several months and first warned it may have to call in administrators in October.
Jones, who bought Jessops out of administration in 2013, is thought to want to cut costs by renegotiating rents and closing loss-making stores. The chain has 46 outlets.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as the coronavirus pandemic. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.
In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit and the coronavirus, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. Many businesses which deal with complex supply chains also want additional help with the new red tape and import charges imposed after Boris Johnson's Brexit deal saddled them with extra costs.
What is the government doing?
In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
Administrators from advisory firm ReSolve were appointed to JR Prop earlier this week. The retailer’s main trading company, Jessops Europe, is not affected by the administration and Jones is thought to want to keep the business going.
The most recent accounts for the parent company Jessops Group, covering the year to the end of April 2018, show it bounced back from a £765,000 loss in 2017 to make a profit of £722,000as sales rose nearly 20% to £120m.
However, times on the high street have got tougher in the past year and a string of high street chains have called in administrators or been forced to restructure amid rising costs, lacklustre consumer spending and the switch to online shopping.
Jessops is thought to have called in administrators after failing to win backing from landlords for an insolvency process known as a company voluntary arrangement which would have enabled store closures and rent cuts.
Its collapse into administration comes after a similar move by Clintons, the card retailer. It was bought out of administration in a pre-agreed deal with its owning Weiss family earlier this week.
The deal, which safeguards 2,500 jobs, came after Clintons also failed to win support from landlords for a CVA to close up to 66 stores.
