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Suppliers squeezed as high street hits new low

UK suppliers and brands are facing a “nightmare” as they struggle to secure credit insurance with an increasing number of retailers amid turbulent trading conditions.

The extent of the crisis on the high street was underlined this week after fast fashion retailer Quiz revealed a sharp decline in its bottom line on Tuesday, the same day as Ted Baker issued a profit warning and womenswear chain Select’s company voluntary arrangement (CVA) was approved.

Arcadia Group is due to announce the outcome of its CVA vote tomorrow, and Monsoon is expected to launch its CVA shortly thereafter.

Suppliers and distributors told Drapers the pool of retailers they can work with in the UK is shrinking, they are struggling to get credit insurance for an increasing amount of retailers, and their existing clients are putting more pressure on them to cut costs.

“It’s a nightmare for suppliers right now. We can’t get credit cover for 60%-80% of our regular customers,” said Achilleas Constantinou, founder of womenswear brand Ariella.

One manufacturer who recently pulled out of working with Arcadia after losing their insurance cover for Topshop said: “We might consider working with [Arcadia] again if their business improves, but when a company struggles, they often ask for some kind of discount or might threaten to cancel orders.

“There are a lot of trust and faith issues that are very rocky on the retail side of things right now.”

One footwear supplier said: “Not working with retailers who don’t have insurance cover on them limits your choices and it limits your top-line numbers.

“We can’t avoid companies who have recently been through CVAs or who have been bought out of administration because the high street is in such a funny place that you wouldn’t sell to anyone if that was the case.”

Another Arcadia supplier agreed: “The insurers are not covering any retailer who is in slightly rocky territory or is not showing growth. It’s like you’re driving down the motorway, you hit a traffic jam, and your insurer says you’re no longer covered. You pay huge sums of money and they’re not covering for any risk. We have to calculate ourselves whether or not it’s a big risk. If I only worked with retailers who had credit cover, I wouldn’t have any business. There’s a growing list of retailers losing their insurance cover, I’d say the majority of our clients aren’t covered.

“The retailers are buying later, pushing margins and putting all the potential risk on suppliers. They’re asking for lower prices than last year.”  

Charles Clinkard, managing director of the eponymous footwear retailer and UK distributor for shoe brand Gabor, said: “Our biggest problem [at Gabor] is getting credit insurance.

“The market is shrinking all the time, and there aren’t any significant opportunities with new accounts. What we are doing is maximising the opportunity we have with some of our best accounts. We’re being proactive in visiting stores, making sure the stock is out and it’s merchandised correctly – seeing how we can help each other.”

Constantinou said Ariella will launch a spring 20 collection exclusively for independents at UK trade show INDX in July, as it seeks to minimise the risk of working with flailing multiples. It is also looking for new retail customers overseas, but Brexit “is making life impossible”: 

“European customers are reluctant to open an account because they don’t want to suddenly be faced with high import taxes [if Brexit happens],” he said. 

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