Barratts ‘nears administration for second time’

Barratts Priceless, the footwear retail chain that survived administration in 2009, is close to appointing administrators for a second time, according to people who are familiar with the situation.

The move comes as poor trading and growing competition from cut-price retailers threaten its ability to pay December’s quarterly rent bill.

Nearly two years have passed since Stylo, the listed retailer which owned the Barratts and Priceless Shoes brands, put the chain into administration, closing down 220 of its 380 UK stores.

Stylo’s chairman, retail veteran Michael Ziff, bought 160 stores from administrator Deloitte in March 2009 after shop landlords voted down a restructuring involving a creditor’s voluntary agreement (CVA).

The company also operates 300 concessions, the majority within Arcadia and Debenhams stores.

Deloitte could be formally instructed as administrator to Barratts Priceless on Thursday, if it looks likely that the retailer will be unable to pay a quarterly rent bill which falls due on December 25.

Mr Ziff declined to comment, but did not deny the information which was passed to the Financial Times when given the opportunity to do so.

Deloitte and Lloyds Bank, which acts as a lender to the company, also declined to comment.

“Barratts Priceless’s problem is not so much rival shoe operators like Clarks and Shoe Zone, but New Look, Primark and the supermarket chains who are all selling cut-price shoes, as their type of customer will happily buy shoes there,” said one person familiar with the situation. “Most of their stores are located in secondary towns, where consumers are struggling.”

The privately owned company made a pre-tax profit of £6.1m on a turnover of £218m ($342m) in the 18-month period to July 31 last year, according to its most recent accounts filed at Companies House. The news comes as retail property landlords are bracing themselves for a wave of insolvencies in the retail sector.

A gloomy economic backdrop has dragged down consumers’ discretionary spending.

In combination with the milder autumn weather, it has forced retailers to discount products to win sales, which has pared back their profit margins.

Clothing retailers, electrical chains and those selling homewares have been hit particularly hard.

Many retailers which managed to stave off insolvency at the peak of the credit crisis have found that CVAs or pre-pack deals have allowed them to keep trading, but have failed to resolve underlying structural issues.

Blacks Leisure, the outdoor clothing retailer, shed 101 stores via a CVA in 2009, but has issued two profit warnings this year, and on Wednesday put itself up for sale in a bid to resolve its balance sheet issues.

Focus DIY closed 38 stores through a CVA in 2009, but collapsed into administration less than two years later after defaulting on loan repayments.

In March, the struggling sports retailer JJB Sports avoided administration after pulling off its second CVA deal with landlords in as many years, agreeing to close up to 89 of its stores, in addition to the 140 stores it shed in 2009.