Retail retrenchment continues

Temperatures soared this week, a fitting backdrop for the meltdown that's taking place on the high street

Jane Norman, Homeform, Habitat, and TJ Hughes became the latest high-profile casualties of the collapse in consumer confidence, which, according to NOP's latest survey data, slipped again in June after May's rebound from a 25-year low in April. RSM Tenon, which predicted the current flurry of insolvencies in its April Traffic Light report, says that 13 per cent of UK retailers are in imminent danger of collapse. "The weather may have improved, but retailers are still staring at a gloomy landscape," said the company's head of recovery, Carl Jackson.

Smaller companies are particularly at risk, but life is equally tough for larger listed operators, and many are turning to radical restructuring programmes to make sure they don't ultimately suffer the same fate. Thorntons announced plans that could see as many as 180 stores closed over the next three years, nearly half of its estate. Having closed a net 24 stores last year, Carpetright also said that it would take advantage of its 94 expiring leases to reduce the size of its business over the next five years, while activist investor Knight Vinke has upped its stake in Kesa , where it is looking to force management into a more radical restructuring programme of its loss-making Comet chain, which could mean more store closures.

But analyst John Stevenson at broker Peel Hunt is more sanguine. "It is easy to write off the retail sector and wider consumer market, [but] the concept of UK Retail plc is no longer relevant given the widening divergence between winners and losers," he said pointing to the likes of Dunelm and N Brown that still have good growth prospects, and Topps Tiles , Halfords and Debenhams as retailers with good recovery potential. We'd also favour financially stronger retailers such as M&S and Next , which will pick up business as rivals fall by the wayside and are trading at knockdown valuations.

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