Retail legend George Davies, the man behind George at Asda and Per Una at Marks & Spencer, has warned more retailers will go bust as the British high street witnesses “the roughest conditions we have ever faced”.
The stark prediction came as Mr Davies visited Birmingham to deliver a lecture at his alma mater, the University of Birmingham.
Mr Davies said he believed more retailers would go under, particularly those with fragile balance sheets, as consumers rein in spending in response to the global financial crisis and increases in the cost of living. “Those businesses that are just breaking even, just getting by and are under-capitalised – those are the ones that are in danger.
“Everyone has to be prepared for the next 12 months to just get by.”
Mr Davies’s comments come less than three weeks after Sixty UK, the company behind the Miss Sixty and Energie fashion labels in this country, was taken into administration.
Sixty UK added to the roll-call of recent retail casualties with Rosebys, the UK’s largest specialist home furnishings group, and Hardy Amies, the Queen’s dressmaker, entering administration in recent weeks.
Mr Davies said although the credit crunch had yet to hit home properly with most shoppers, people were changing their habits in anticipation of tougher times ahead and trading down to cheaper stores.
“I have always divided people into two types – discerners and non-discerners.
“Discerners are able to put factors such as style, service and presentation together and make a value judgement of whether to spend £30 or not. Non-discerners buy just on price – they would go to a cheap restaurant just because it is cheap.
“What we will see happen is that the sector of people who buy on price will swell.”
Evidence of this trend came earlier this month when Associated British Foods, owner of Primark, said sales and profit at the budget fashion store would be well ahead of last year.
Primark’s owners expect the budget retail brand to have opened eight stores in the second half of the year with five in Spain and three in the UK, bringing its total to 181 stores.
But the rest of the high street is not feeling so optimistic as two of Britain’s biggest clothing retailers reported lower annual profits and weakened recent trading.
Arcadia, the fashion group which includes Topshop and Miss Selfridge, reported a 6.1 per cent drop in operating profits and Debenhams, Britain’s second-largest department stores group witnessed a 16 per cent fall in profit before tax.
Mr Davies was in Birmingham to deliver a guest lecture at Birmingham Business School at the University of Birmingham entitled “Creating the Brand” to students, staff and alumni.
He studied Dentistry at Birmingham before embarking on a career in retail.