TAKING STOCK: Let's look on the bright side of the High Street

By NEIL CRAVEN, MAIL ON SUNDAY RETAIL CORRESPONDENT
Updated:

Investors in retailers' shares will be relieved to know that the world didn't end last week. The billions spent over Christmas have shown that customers will spend money when they really want to.

The failure of children's clothing chain Adams, Woolworths, CD retailer Zavvi and a growing list of smaller High Street names suggests that something is badly wrong.

But, if we dare, let's try to look on the bright side.

Cheer up: Although many companies have gone under, others will benefit from the retail gloom

Cheer up: Although many companies have gone under, others will benefit from the retail gloom

First, if there is a silver lining to the cloud over the High Street, it is that most of the failures so far have been accidents waiting to happen.

Both Woolworths and Zavvi have traded on the back of a strong retail market for a long time and the sudden downturn has finally seen them off.

In the fallout, we can expect to see HMV benefit in the absence of big High Street rivals.

And though Argos, owned by Home Retail, is expected to show pain this week from the discounting at Woolies, it might benefit once the dust has settled.

Second, many of the disasters we have seen so far have been directly related to the banks. Bank of Ireland pulled the plug on Woolies and has performed the same trick with Rosebys, Royal Worcester & Spode and Adams. Former Adams owner John

Shannon is this weekend working on a rescue bid.

Retail gossips suggest that these firms won't be the last to suffer.

Third, many retailers are suffering from Iceland's economic collapse. Fledgling maternity chain Blooming Marvellous, which went into administration last week, was owned by troubled Icelandic investor Arev.

Finally, however, we can't ignore the fact that there is a squeeze. Retail sales figures out this week are expected to show that consumer spending in December was down year-on-year.

We don't mind buying affordable treats, but a plasma TV and a new wardrobe are off the agenda with increasing nervousness about jobs.

Marks & Spencer's trading update last week suggested that it would have to try harder to tempt us to buy its clothes, while DSG International, owner of Currys, will this week report a sharp drop in quarterly sales.

The wise investor will concentrate on the food retailers. Tesco, reporting this week, is a behemoth not to be written off, despite weaker growth recently, while Morrisons is expected to be crowned king of the retail sector next week when it reports an increase in quarterly sales of about double Sainsbury's 4.5 per cent.

Other retailers worth looking at for the longer term include Halfords and outsize clothing specialist N Brown, which report on Thursday. Both have their risks, but neither has a major competitor.

While it's grim on the High Street and might get worse, there are always those that will exploit the crisis. Credible management and a clear strategy are what are required.

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