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12 April 2018

End of the road for the High Street?

The rise of online shopping and rising inflation have changed the face of the high street, according to new figures, with more than 5,800 shops closing across the UK in 2017.

According to the Local Data Company, last year saw the lowest number of new bricks-and-mortar shops opening since 2010.

However, Roy Kaitcer, Investment Manager at investment management and stockbroking firm Redmayne Bentley, said companies that had evolved to meet the needs of changing shopping habits should continue to thrive in the new retail environment.

Roy said: "For the retail sector in general, things are looking tough.

"With rising inflation and wage growth having been slow for some time, consumers have been reducing their expenditure and therefore it’s not been a good time for shops on the high street.

"Of the physical high street stores, the discounters, such as B&M and Home Bargains, seem to be doing best.

"Another store that has done well recently is the FTSE 250 firm JD Sports, which is offering something different to other retail stores as its branded sportswear and trainers are aimed at the younger consumer."

He added online retailers such as ASOS and boohoo.com had been defying the high street gloom. Further demonstrating the increase in online shopping was fashion chain Next’s most recent results. While sales in its high street stores were down 7%, online sales increased just over 11% during 2017.

Elsewhere in the retail sector, it was a far more positive story for Tesco, which, on 11th April 2018, reported pre-tax profits of £1.3bn for the year to 24th February 2018, with UK like-for-like sales rising 2.2%.

The supermarket has seen a major turnaround since 2014, which saw an accounting scandal and an ongoing fall in sales and profits. In 2015, the store reported a record loss of £6.4bn.

Roy commented: "In the case of Tesco, we’ve seen a recovery since Dave Lewis was brought in as chief executive three years ago, and he has improved efficiencies across the group.

"It’s a similar story for Morrisons, who have had their problems in the past, but have seen a turnaround since bringing in new management.

"The high street is going to come under continued pressure as online shopping is becoming more prevalent. Its future will be shaped by the survival of the fittest, and the shops that have adapted to the difficult retail environment and continue to have something to offer today’s consumer should survive."

 

End of the road for the High Street?

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