The death of the retailer: Five firms bucking the trend

It’s been a tail of doom and gloom on the UK high street for a number of years now. Since 2008 we’ve seen household names like Woolworths, Comet, JJB Sports, Barratts, Blockbuster, BHS, Maplin, Poundland and Toys R Us all become a thing of the past. Thomas Cook looks set to join the list following its recent collapse. Other retailers such as Top Shop owner Arcadia, Monsoon, New Look and Homebase have been forced to seek legal agreements with their landlords to shut stores and slash rent to prevent them becoming insolvent.

What it adds up to is that, over the past three years, 106,000 jobs have been lost on the UK retail sector*. The bigger worry is there could be up to 900,000 fewer jobs in retail in the next decade*.

What is causing the decline?

There are lots of reasons for the fall. Perhaps the most obvious is the rise of online shopping, with the likes of Amazon appealing to customers by offering easier and cheaper ways to acquire goods. The company's net income more than tripled last year from $3 billion in 2017 to $10.1 billion in 2018, a reflection of its appeal to customers globally. It’s growth is forcing traditional businesses to look at new ways to lure customers into their stores – sales alone will no longer cut it with in-store events, for example, being used.

But there are other reasons, such as squeezed incomes - courtesy of prices rising and a fall in wage growth. The fall in the value of the pound following the Brexit vote has also pushed up the cost of sourcing goods abroad. The rise in the minimum wage and an increase in business rates, as well as too many under-performing outlets for major retail chains and increasing debt – a result of over-expansion from some firms – has also played a role.

Companies bucking the trend

According to consultancy PriceWaterhouseCoopers (PwC), UK retailers are having to adjust to the ‘new normal’ of a subdued trading environment, by taking market share away from other players and adapting to the more conscientious shopper.  Some firms have already taken up the gauntlet of change and are succeeding as a result. Here are five businesses who have adapted to the way consumers spend their hard-earned money.

JD Sports

JD Sports is a rare UK high street success story, with over 32,000 employees. It is a top 10 holding in the Marlborough Special Situations and Marlborough UK Multi-Cap Growth funds, which are on the Chelsea Selection and Core Selection respectively**. Marlborough UK Multi-Cap fund manager Richard Hallett says: “JD has grown up leading the growth of the UK quality sports fashion sector, however, has latterly embarked upon international expansion. The acquisition of Finish Line in the US looks to be a transformative deal, with encouraging trading news recently. Executive Chairman Peter Cowgill runs a tightly controlled management team and with prodigious cash generation forecast to be over £550 million this year.”


Tesco is the UK's largest retailer. with almost 7,000 shops, the first of which opened in Burnt Oak, Barnet in 1931. It currently has 450,000 employees and has a net income of £1.32 billion in 2019. The stock is a firm favourite among a number of UK fund managers including Artemis Income and BlackRock UK Absolute Alpha on the Chelsea Selection**. It is also a top-10 holding in the Investec UK Special Situations fund**, whose manager, Alastair Mundy, says: “Once arguably a market darling, Tesco, alongside other UK food retailers, came under enormous pressure due to the rise of the discounters. We identified a value opportunity around three years ago, when the likes of Aldi and Lidl aggressively cut prices in the hope of attracting more custom. Having responded to initial fears, Tesco is now competing more successfully against the discounters and we believe is on the path to recovery – despite the recent announced change in leadership next year.”


Cake Box is a much younger company having opened its first store in East London in 2008.  It had a new concept: egg-free individually-crafted and personalised fresh cream cakes, which could be ordered in advance or purchased on demand. It has now grown to have 113 stores and was named one of the 100 fastest-growing companies by turnover in the UK last year. It is also holding in Richard Penny’s FP Crux UK Special Situations fund. He says: “It’s a franchise operation like Dominos Pizza, which was one of the best performing stocks of the noughties. Because the franchisees pay for the shops and brand it Cakebox, it is a low capital outlay for the company. It also has a very high (52%) return on capital.”


Clothing, footwear and home products retailer Next now has over 500 stores in the UK alone. The firm is the largest home retailer in the UK and has almost 44,000 employees globally. Edentree Amity UK co-fund manager Ketan Patel says the stock has been a core holding in the fund for three decades. He says: “The long tenured CEO has been one step ahead of market trends, generating excellent returns for investors as a result – on average 16% per annum since 1988, over three times more than M&S, which it surpassed as the UK’s largest clothing retailer by sales in 2012.”


Morrisons is the fourth largest supermarket chain in the UK with almost 500 stores and employing 110,000 people. The fund is held by numerous funds, including Schroder Income and Schroder Recovery funds. It is also one of the largest holdings in the Liontrust Monthly Income Bond fund. Investment manager Kenny Watson says: “We see this as a defensive, resilient business, albeit one that operates in what remains a challenging consumer environment. From a sustainability perspective, the company hasn't achieved all its targets, but it has made significant improvements in areas such as reducing food waste (by both selling 'wonky' products and giving food past its sell-by date to other organisations), introducing paper bags instead of plastic ones and using LED lighting.”

*Source: British Retail Consortium (BRC). September 2019
**Source: fund fact sheets, 31 August 2019

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed and figures shown are provided by the fund managers and do not constitute financial advice.

Published on 08/10/2019