More High Street Names That Could Be Crushed By Christmas

Published in Investing on 25 November 2011

Things are going from bad to worse for retailers.

A month is a long time on the high street. There's been an interminable flow of bad news and numbers from retailers since my October article about five high street names that could be crushed by Christmas.

The Brothers Grim

Here's the latest on the five:

  • Nightclub-owner Luminar has been placed into administration
  • JJB Sports (LSE: JJB) has reported an 18% fall in like-for-like sales and seen a near-halving of its share price;
  • Blacks Leisure (LSE: BSLA) has updated with a 7% decline in sales. In a further update, just today, the outdoor-leisure group has warned on profits and the need for additional funding -- the shares have now lost two-thirds of their value;
  • Interim results from HMV (LSE: HMV) aren't due until next month, but, in the meantime, director buying has provided a bit of support for the share price (down around 10%); and
  • Clinton Cards (LSE: CC) has provided a sliver of positive news. Despite reporting a hefty loss for the year, the greetings-card specialist has managed to negotiate an extension to its credit facilities, and the shares have rallied over 60% in relief.

Two more in trouble

Elsewhere on the high street, Thomas Cook (LSE: TCG) had looked as if it might get through to the crucial spring booking season after securing a credit arrangement with its banks in October.

However, this week, the struggling travel agent announced that it has had to go back to the banks, and its full-year results will be delayed. Translation: the company needs to borrow more money because the auditors probably feel unable to issue an unqualified going concern report as things currently stand.

Video-games retailer Game (LSE: GMG) is another in deep water. A £24m small cap, which already had net debt of over £90m at the end of July, last week issued a trading-below-expectations statement.

Game, which came close to making it on to my original list of five, and Thomas Cook, both merit inclusion among the high street names that could be crushed by Christmas.

Yet more bad news

Surely there's some good news? Not really.

French Connection (LSE: FCCN) disappointed the market last week, as did Mothercare (LSE; MTC), whose UK business is in dire straits; the previously resilient JD Sports (LSE: JD) issued a downbeat update on Wednesday this week; and, to top it all, retail tycoon Sir Philip Green yesterday reported a 38% profit crash at his Arcadia empire -- Topshop, BhS, Miss Selfridge and others.

The only recent positive news came from Dixons Retail (LSE: DXNS) -- and that this was merely that losses weren't as bad as analysts were expecting just about says it all.

So far as investing is concerned, if you're thinking of taking a wild punt on a distressed retailer, it could pay to be patient. Low though some companies' share prices seem today, I know that at least one institutional investor is expecting heavily-discounted refinancing opportunities on the high street come 2012.

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ryandj 25 Nov 2011 , 1:29pm

An ETF of high street retailers would be an interesting short for the New Year...

UncleEbenezer 25 Nov 2011 , 3:15pm

Up-and-coming high-street shops seem to make for some profitable investments. Like Go Outdoors, whose sale earlier this year provided a very juicy dividend for its VCT investors.

pickepics 26 Nov 2011 , 6:53pm

It is arguable that TCG have suffered from an element of bad luck. But for the rest they have simply failed to move with the times. Bad management in my view. In days of yore valve makers failed to switch to diodes then transistors then micro chips. Then the butcher, baker and greengrocer had to give way to the supermarket. I enjoyed visiting several of those mentioned above in the past but in recent years have walked straight past without a second glance.

Sadly for our city centres, the up and coming shops like Go Outdoors do not choose the high street. None near me anyway. Very sensible too, to have better public access at reasonable overhead. I wish some of them would float. That I would certainly consider.

Bargain hunting among a pack of "heavily-discounted refinancing" losers when there are so many more promising prospects in other sectors will be very easy to overlook, methinks.

G12th 26 Nov 2011 , 9:47pm

It's like dejas-vu all over again

Yogi Berra

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