Republic has sadly entered administration, which is a disappointing turn of events for a retailer that had been gaining clothing market share up until calendar year 2011, but highlights the changing young fashion landscape.

Republic has sadly entered administration, which is a disappointing turn of events for a retailer that had been gaining clothing market share up until calendar year 2011, but highlights the changing young fashion landscape.

Following on from Gio Goi in January, Republic is the latest clothing casualty for Q1 2013, a brutal reminder of how the state of the economy continues to impact discretionary spending in the sector.

With stronger competition luring shoppers away and the costs of a 121-store portfolio hitting profitability, it comes as little surprise that the business is calling in administrators, especially considering the disastrous 86.3% drop in operating profit, to just £3.7m on sales of £177m, for its financial year ending January 2012.

A sustained period of high unemployment among young consumers, alongside rising university fees, increased living expenses and weak wage growth have contributed to weak volume growth across the clothing sector and forced shoppers to cut back or trade down – impacting footfall and average basket size at Republic.

Republic fared well between 2007 and 2011, growing its share of the clothing market by 0.2 percentage points to 0.8%, with consumers attracted to the mix of affordable exclusive labels and third party brands. But there has since been a shift in consumer shopping habits.

Now the likes of H&M, JD Sports and Primark compete too strongly on price for basics and newness, encouraging shoppers to trade down. Meanwhile Asos, River Island and Superdry have a far more attractive destination appeal and better quality perception for those shoppers wanting added value. This has made it increasingly difficult for Republic to differentiate itself in what is now a very mature and challenging clothing market.

With this outlook Republic should have been reducing store numbers rather than opening more. Had it exited loss-making stores or negotiated with landlords sooner to agree on lower rent or monthly payments, the impact the store portfolio had on the overall operating performance could have been reduced and allowed it to focus investment on branding and range development.

Whether Ernst & Young will decide that the business deserves a place in the market is yet to be seen, but it would have to seriously re-balance its finances and action immediate store closures to efficiently turn performance around.

Alongside the nitty gritty of financials, the administrators and future management, if saved, will be forced to look at Republic’s target market, their spending influences and their ability to shop for discretionary purchases to ensure the ongoing business is suitable and viable for the current and future UK clothing market.

Honor Westnedge, senior retail analyst, Verdict