Member Article

Retailers must innovate say PwC

North East retailers need to be innovative in order to survive market challenges and increase valuations, experts have said.

PwC in the region have released the latest Valuations Index which reveals the UK retail sector is now a mature market, not having grown in real terms since 2002.

The firm suggests innovation will be critical to retailers’ growth prospects, and less innovative firms will fare worse.

Jonathan Greenaway, partner at PwC in the North East, said: “Some retailers in the region have responded well to the market challenges and their prospects for growth are somewhat better, due to their focus on product and channel innovations such as a successful online strategy or international expansion.

“In these cases, the use of higher profit multiples when making valuations may be justified.”

Companies on the high street have found their core business is increasingly pressurised by online retailers and supermarkets, and with huge fixed cost bases in their store networks, there are no obvious or quick fixes to resolve these issues.

Ian Logan, Valuations director at PwC in the North East, added: “We would normally expect profit multiples for retailers to rebound after a recession as market sentiment improves.

“While this may be the case for some top-performing players, prospects for real growth are limited in what is a hugely competitive marketplace.

“This means that investors interested in buying a retail business should take care that their valuation is properly aligned with the growth prospects of the business.”

This was posted in Bdaily's Members' News section by Tom Keighley .