Ethel Austin won’t be the first retail casualty

Apr 16 2008 by Bill Gleeson, Liverpool Daily Post

THE news that Ethel Austin has gone into administ- ration is a big blow to the hundreds of staff based in the region who work for the retail group.

It’s never easy to face a period of uncertainty about where the next penny is coming from. I have known the feeling, and can sympathise.

But at least there is the prospect of the thousands of new retail jobs being created just a short bus ride away from Ethel Austin’s head office.

The new stores opening at Liverpool city centre’s Liverpool One shopping development in the next few months will provide anybody with a background in retail with fresh opportunities.

Things may not be so easy for the company itself. Despite the Liverpool One development, retail market conditions around the rest of the country are getting worse.

There has to be a question mark over whether there is still a strong market for Ethel Austin’s core offering.

The plan to double the size of the business by opening new shops around the country always looked ambitious. The store opening programme only got 20% along the way before it was halted.

The world, it would seem, has moved on, and Ethel Austin’s place in the digital era looks doubtful. It doesn’t seem to be the sort of the business that could thrive on the internet. People are hardly going to spend 99p on a packet of ankle socks and then another £5 for postage and packing. That, presumably, is why you can’t buy online from Ethel Austin’s website.

The fate of Ethel Austin is an alarm call for everybody, particularly those businesses, which – like Ethels – are owned through a highly leveraged management buyout.

The debts taken on to buy the group have been crippling at a time when difficult high street conditions have meant falling sales. Now, with the credit crunch meaning banks are getting more and more tight-fisted, only those with a very strong business case can be sure of getting the support they need.

If reports are to be believed, Ethel Austin’s management has been trying for weeks to raise new finance, but with no success.

Things are made worse by the fact that Ethel Austin’s principal investor, ABN Amro, appears to have taken a huge hit on its investment in the firm. Nobody else is going to want to have their fingers burnt.

And if Ethels can’t get the money they need, it raises the question “who’s next?” There are bound to be more casualties in the weeks and months ahead.

ON THE subject of victims of the high street downturn, it’s more of a surprise that Johnson Service Group should be struggling.

While the £82.5m proceeds from the Prescot-based company’s sale of its corporatewear business have gone a long way to paying off its heavy debt burden, the move will have done nothing in its own right to restore profitability.

On the face of it, Johnson is a business that should be doing well. It has a well- recognised brand with shops in good locations. Yet people seem to be using the services of dry cleaners less than they used to.

Dry cleaning, it appears, is a discretionary spend, with consumers preferring to go a bit niffy rather than fork out £10 to have a suit cleaned.

The smoking ban has reduced the need to have clothes cleaned as frequently as in the past. It’s now possible to go for a night out and return home without your glad rags smelling like a stale ashtray.

Johnson may still need to take a few actions yet to cut its cloth to meet its circumstances, but the group certainly has many years of trading ahead of it.