The rents U.K. retailers are asked to pay will likely fall in the coming years as brick-and-mortar retailing becomes less profitable, Peter Cowgill, executive chairman of sports, fashion and outdoor brands retailer JD Sports Fashion PLC said.
Speaking to BBC Radio 4's "Today" program, Cowgill said the cost of operating stores in the U.K. was "excessive" considering the growing competition retailers face from online outlets. The JD Sports group has almost 500 stores in the U.K., where a slew of major retailers entered insolvency processes in 2018 resulting in widespread store closures.
"One would expect price flexibility to come into play increasingly over the next few years in terms of U.K. property," said Cowgill. "Rents, [property taxes] and service charges, I would think there will be downward pressure on those. And there needs to be more agility in the market, more flexibility so that leases aren't quite as long-term and the commitment isn't [as] great."
In the last two months, more than 20 U.K. retail chains have instructed accountancy firm Deloitte to assess whether they are able to restructure their debt, according to a Jan. 13 report by The Sunday Times (London), which did not state where it got the information. Deloitte is considering whether the retailers can use an insolvency process called a company voluntary arrangement, the report said, which often results in businesses minimizing debt liabilities at the expense of landlords.
The JD Sports group bucked the trend of store closures in the U.K. among major retailers by expanding its real estate footprint in the market during the last 12 months, Cowgill said. The slight expansion comes on top of a positive performance of 2% to 3% sales growth in the U.K. over the period, "which against [the] extremely high sales densities of previous years is very encouraging," he added.
JD Sports' latest trading update, which Cowgill appeared on the "Today" program to discuss, saw the retailer record total like-for-like sales growth of more than 5% over the 48-week period to Jan. 5, 2019. The JD Sports group has about 1,000 stores outside the U.K., according to its 2018 annual report.