Virus impacts on retail businesses
EVENTS are being cancelled, people are working from home and retail businesses are in uncertainty in light of COVID-19.
Phil Chapman from Lease1 who advise and support the executive and members of peak retailer associations, has released a statement about what the virus means to retailers and tips on how to stay afloat.
"I want to talk about the elephant, or rather, mammoth in the room, the coronavirus Disease
2019 (COVID-19) and its effect on the sector.
"First of all, let's keep things in perspective and consider that the Government has already clearly acknowledged that Shopping Centres (in other words, Retailing) is an essential part of the community and to date will not come under the recent public health initiatives.
"But safe to say, the vast majority of Retailers are feeling the effects financially.
Mr Chapman said leadership is required from all facets of the retail sector including landlords,
lessees/retailers, bankers, suppliers, staff teams and the Government to guide businesses through what is likely to be a lengthy period of trading distress.
"There is no Retail Lease Legislation or corporate contractual contingency including business disruption underwriters that address quarantinable diseases such as COVID-19.
Mr Chapman suggested a battle plan is required for all parties to come through this period without wholesale closures.
"Retailers need to get ahead of the herd and start today on the following elements to develop their own battle plans.
10 Step Plan of Attack:
- Review rosters v trading hours and create a saving plan (landlords are already advising
they will be flexible here).
- Negotiate with Bankers to defer loan payments.
- Same for equipment and chattel leases, seek to defer.
- Suppliers, negotiate suitable payment terms and even defer part or all payments for a period of time.
- Review and remove all non-essential operating costs, for example storage.
- Defer capital expenditure on equipment, shop refurbishments, etc, and channel funds into
the operating costs plan.
- Compare your numbers on customer counts, sales, gross profit and P & L reports for the
same weekly/monthly period this year to last year-be an open book.
- Review your lease for savings areas such as waiving of annual rent reviews, reduction in
security/bank guarantee to free up capital.
- Create a revised sales and cash flow projection to the end of this calendar year making
assumptions based on the above savings.
- Make an appointment to sit down with your Landlord and discuss where they fit into the
battle plan. This may be through rent abatement, deferring rent, extending lease term or a
combination of these.
"Retailers who are experiencing difficulties paying rent right now, need to get their "head out of the sand" and call their Landlord right now. Advise where they are at, how much they can afford to pay and when and further advise when they will have their battle plan for review and discussion.
"If this approach looks like too much hard work, then Retailers need to get help now as time is of the essence to set their business up. Not just for survival but to be in a position to thrive once the COVID-19 crisis passes.