Intu Properties deals a new blow to the UK economy

Tens of thousands of jobs have already moved into the energy, banking, aviation and aerospace industries and many more are now at risk after Intu (INTU), one of the UK’s largest shopping mall owners, said Friday that he is entering administration. The company has debts of £ 4.5 billion ($ 5.6 billion) and was unable to agree to pay holidays with its creditors. Its shares, which have been on a downward trajectory for several years, fell 54% on Friday before being suspended.

Intu has 17 shopping centers in the United Kingdom and two in Spain, with capacity for 800 brands and 400 million buyer visits a year, according to the company. These centers will remain open during the insolvency process and individual retailers will be required to sign transition agreements with managers, KPMG.

But UK retailers are suffering from a collapse in sales and many have been unable to pay rent for the next quarter, raising questions about how many shopping malls can realistically afford to remain open.

Only 14% of the rent owed by UK retailers for the third quarter of this year was paid on June 24, the due date, according to the property management platform Re-Leased.

“We hope there will be more pressure to come,” Re-Leased CEO Tom Wallace said in a statement Friday. “The temporary ban on evictions for non-payment of rent and the government’s suspension plan are providing a lifeline for many tenants at this time, but those measures will not last forever,” he added.

Intu said it received just 29% of second-quarter rent from tenants, up from 77% in the same period last year. Intu, which employs 2,600 people, was in a difficult situation to enter the pandemic. It posted a loss of £ 2 billion ($ 2.5 billion) last year.

The news of its insolvency collapse will be a particularly bitter blow to retailers as it coincides with a loosening of closing restrictions in the UK that has allowed stores to welcome customers again for the first time in months.

Brands like Zara and H&M (HNNMY), which have already suffered sharp falls in sales this year, have points of sale in shopping centers owned by Intu. H&M said Friday that global sales fell 50% from March to May, while Zara owner Inditex, the world’s largest clothing retailer, reported a 44% drop in sales during the three months through March. . Both brands plan to speed up store closings and a switch to online retail, one of the few bright spots in the pandemic.
Shoppers queue at an H&M store at the Lakeside shopping center, operated by Intu, in Thurrock, UK, on ​​June 19.

Only grocery stores and online retailers have dodged the drop in UK retail sales in recent months, with the pandemic accelerating a move towards e-commerce that was already hurting physical stores. Both the volume and value of retail sales suffered record declines during the three months through May, falling 14% and 13%, respectively, compared to the previous three months, according to the Office of National Statistics.

The proportion spent online shot up to the highest on record in May at 33.4%, breaking the record of 31% in April, according to ONS.

In the United States, several major chains, such as JCPenney and Neiman Marcus, have already filed for bankruptcy and up to 25,000 physical stores are expected to close permanently this year, driven in part by the continued shift to online shopping, according to Coresight Research. . More than half of store closings are expected to take place in shopping malls.

Britain's largest companies are cutting tens of thousands of jobs.  Millions more are at risk

UK crisis

The pandemic is forcing companies in Britain to take drastic measures.

British Airways father IAG (ICAGIA) went into crisis with cash of around € 10 billion ($ 11.2 billion). Still, the carrier can cut approximately a quarter of its workforce, or 12,000 jobs, as the effects of the coronavirus crisis on global aviation persist.
Several other major UK companies, from Rolls Royce (RYCEY), BP (BP), EasyJet (ESYJY) and HSBC (HSBC), to luxury goods maker Mulberry, an energy company Centric (CPYYF) and supplier of aerospace parts Meggitt (MEGGF) They are cutting jobs.

More job losses are expected when the government’s wage support program, which currently subsidizes 9.2 million wages, or more than 27% of the workforce, ends in October.

Meanwhile, industry groups have warned that British companies, which have already borrowed billions of pounds under government coronavirus relief programs, will not be able to resist the impact of new EU trade barriers that will result if a deal is not agreed. trade agreement with Brussels this year. .

Nathaniel Meyersohn contributed reporting.