Look for largely "offline’ retailers with no loyal customer base backed up by shoddy balance sheets, these will be the next set to fall - theres a few of them as well:
- Hard to imagine Debenhams surviving. They should have sold out to Frasers group when they had the chance
- River Island is looking precarious based on the last available accounts but the Arcadia news could well help them.
- I’d expect consolidation in the Grocery sector from the old ‘big 4’ over the next 5 years. There is a race to the bottom & the top happening, being caught in the middle seems to be the worst place to be right now
- Dixons Carphone is looking a little precarious too. Its actual debt is quite low but now that leaseholders have to capitalise their leases, this weights heavy on balance sheets. Margins are razor thin as well.
- For the same reasons I’d be wary of Halfords. I know they’ve had a temporary lift from Covid but again they’re operating on razor thin margins with a heft loaded balance sheet.
- I think the likes of Next & M&S will be fine (Next more so). Next has pivoted to online in a beautiful way & its capital allocation has been superb for many years now
I’d expect the Frasers & Boohoo model of ‘hoover up the good parts of failed companies’ will be the ongoing success of the next decade.
Traditional retail isn’t a pretty place to be in the UK right now. The % of the pie is shrinking & too many retailers don’t have a proper plan to go online - Covid is only going to accelerate this. You need to be a true to heart value investor to be putting money in the UK retail right now - sure there are bargains to be had but its just as easy to lose everything.
Not sure if its relevant for this topic or not but I’m of the opinion that Cineworld group’s future lies in the hands of 2 US states (California & New York). If they don’t bounce back quickly then the entire group will crumble. I personally think it is borderline criminal how this company is managed.