substantial financial and operational
restructurings. Retailers in the
electronic consumer goods segment
were also in severe distress, with
prominent insolvency cases of well-known brands Loewe and Metz.
On the other hand, German discount
grocers continued to prosper by virtue of
their aggressive expansion into the food
retailing sector in the UK, irrespective
of the ongoing consolidation process
in Germany that recently triggered
the proposed merger of the Edeka
group with Tengelmann (Kaisers).
This merger is currently under review
by merger control authorities.
France. Despite decreased household
consumption in 2014, the number of
insolvencies in France declined in the
retail sector, even though generally
the number of insolvent companies
increased by 25 percent in 2013.
As an example, the giant conglomerate
Vivarte (holding, among others, the
brands Kookai, Naf Naf, Chevignon,
Caroll André, San Marina) had to
restructure its € 2. 8 billion of debt at the
beginning of 2014. In that case, former
shareholders Charterhouse, Chequers,
and Sagard were replaced by Alcentra,
Babson, Goldentree, and Oaktree after
eight months of intense negotiations
that led to the write-down of the debt to
€800 million through a debt-for-equity
swap. Also, the shoe distributor Bata fell
into administration at the end of 2014.
Generally, independent retailers are
experiencing a serious crisis with
mass closures. The development of
e-commerce continues to impact these
businesses, forcing companies to open
their own online stores for their brands.
Further, mass retail is experiencing an
intense price war and is undergoing
profound changes, especially after
the merger of central buying services,
such as Système U and Auchan.
The situation is difficult, but all is not
lost, as the global economy seems to
be improving slowly. However, major
restructurings of a number of French
retailers are likely to be needed if they are
to survive changing consumer habits.
Spain. In the latter half of 2014, the
Spanish retail sector became the
largest percentage of companies
represented in insolvency statistics. In
the last quarter of 2014, a total of 153
companies in the wholesale and retail
trade and automotive industry were
forced to open insolvency proceedings
because they could not pay their
debts. Currently, one in five Spanish
companies involved in an insolvency
proceeding is in the retail sector.
Why is this? In spite of a slight
increase in domestic consumption
levels, consumer demand in Spain
remains insufficient to sustain the
business of retail companies. In other
words, the increase in consumption
has not been sufficient to prevent
companies in this sector from
experiencing financial difficulties.
Until domestic consumption increases,
Spain will not see a significant
reduction in the number of bankruptcy
proceedings in the retail sector.
However, the Spanish government’s next
round of tax cuts is expected to put more
money in the pockets of consumers
and provide fewer deductions for small
and medium companies, which should
have a positive effect on business.
It is important to point out that despite
these factors, the economic crisis in
Spain has not affected all of Spain’s
companies, some of which remain
among the largest retailers in the world.
The latest edition of Deloitte’s “Global
Powers of Retailing” report, 3 which
ranks the top 250 retailers in the world,
showed Mercadona had maintained its
position as the largest Spanish company
on the list, at 42nd. Inditex and Dia each
climbed one spot, to 44th and 72nd,
respectively, while El Corte Inglés and
Eroski retreated only slightly in the latest
rankings, to 66th and 136th, respectively.
It appears that competition and
online pressure in the retail market
is continuing to grow, and it will be
interesting to see how retailers react
to these demands over the course of
2015. It is anticipated to be a year of
profound change with the UK's big-four
supermarkets being compelled to make
radical changes to compete with other
European, especially German, discount
grocers that broke into the UK market
in 2014. To compete, UK supermarkets
must make radical changes to their
price and business models and rethink
their property portfolios to concentrate
on convenience stores rather than
shopping centers, where they focused
their expansion efforts in the past.
All European retailers must balance
the need to invest between “bricks and
clicks” (both property portfolios and IT
systems) to protect their margins and
meet growing consumer expectations.
They also must plan early for Black
Friday 2015, because that traditional
kickoff to the holiday shopping season
in 2014 brought immense promotional
and pricing pressures and distorted
profits during the Christmas period
that retailers had traditionally been
able to rely on in previous years.
European retailers live in
interesting times. J
1 Prudential Assurance Co Ltd & others ( 2)
Luctor Ltd & others v ( 1) PRG Powerhouse
Ltd & others ( 2) Anthony Murphy &
others  EWHC 1002 (Ch).
2 Mourant & Co Trustees Ltd & Anor
v Sixty UK Ltd & Others 
EWHC 1890 (Ch) ( 23 July 2010).
In spite of a slight increase in domestic
consumption levels, consumer demand
in Spain remains insufficient to sustain
the business of retail companies.