The Retail Week – January 11, 2008

What a week. In my three years editing Retail Week, I can’t remember a worse week for the sector and I suspect those with much longer memories would struggle too.

But it’s worth stepping back from the hysteria to look at what’s really happened. Marks & Spencer’s Christmas trading was disappointing, but 2.2 per cent down like–for-like is no disaster. Next’s like-for-like decline was less than half what it was in last year’s January update.

PC World’s performance was an unmitigated disaster, but the remainder of DSGi’s UK business was OK. And then of course there was Sainsbury’s revealing a 3.7 per cent comparable rise yesterday – hardly the stuff of recession.

This is not to make light of the very real issues facing many retailers at the moment, especially in fashion and furniture, but to say – as Sir Stuart Rose did this week – that this is not a recession. What has happened is that consumer confidence has taken a big knock and needs some stimulus to recover.

What has really made this such an awful week has been the reaction of the City. Marks & Spencer and DSGi are now worth a third less than they were a month ago and Kingfisher is worth half what it was six months ago.

Its understandable that retail stocks are going to be hit when sales are dropping and, in the case of smaller retailers that are getting absolutely clobbered, such as Land of Leather or ScS, no one can blame investors for running scared.

But the flight from the big general retail stocks is crazy. These are well-run companies with strong balance sheets and enduring brands. In the case of M&S and Kingfisher, they are also backed by valuable property portfolios.

The nature of mass-market retailing dictates that even the best companies in the sector can’t be immune from the ups and downs of consumer sentiment. There’s a lot of bullshit talked about retail at this time of year – remember it wasn’t that many days ago when the City was telling us M&S was going to have a good Christmas and Sainsbury’s a bad one – but well paid fund managers should be wise enough to see through it and show some faith in the UK’s top retailers.