WHAT IS the problem with Britain's biggest high street names at the moment? Yesterday's profits warning from Marks & Spencer is the fallen giant's second in a year. The much-vaunted autumn fashion ranges have failed to woo shoppers who have found the weather too warm to buy woolly jumpers and winter coats.
Storehouse, the Bhs and Mothercare retailer, is no stranger to profits warnings itself, and produced another yesterday saying losses could hit pounds 20m in the first half. Having already lost its chief executive in the spring, the group is again considered a takeover target.
The list of high-profile casualties does not end there. Sainsbury's is still losing ground to Tesco and Asda and seems unsure of which way to turn. Boots shares have lost a third of their value since January on the threat of a supermarket price war. And WH Smith has yet to prove it can cope with the strategic challenge posed by Internet sales of books and CDs.
These retailers, many of whom were pre-eminent in their sectors at the start of the decade, now face a far less certain future as the Nineties draw to a close.
What does it all mean? Are we witnessing the start of a major change on the British high street, where the top names of yesteryear are gradually replaced by younger, nimbler competitors. Or can the problems be attributed to short-term, company-specific issues such as management failure or the odd, seasonal buying mistake?
There are certainly company-specific issues in all the above cases, and WH Smith, has recovered from its weakest point of a couple of years ago. But both M&S and Sainsbury's failed to notice how rapidly their markets were changing and have been heavily punished for management lethargy. Storehouse under-invested in both Bhs and Mothercare, and Keith Edelman, the former chief executive, paid for consistent under-performance with his job.
According to Philip Dorgan, retail analyst at WestLB Panmure, some of these companies grew too used to success. "It can't be a coincidence that all the groups are struggling. They were never as good as we thought they were."
What has humbled these former giants is a combination of factors ranging from price deflation, over-expansion, increased high street competition and the threat from new channels of distribution such as the Internet and interactive television, as well as growth in re- invigorated areas like catalogue shopping.
Take price deflation first. After years of relying on inflation as an excuse to raise prices, retailers suddenly find they are having to operate in a new era of low inflation or even price deflation. According to Kevin Gardiner, a senior economist at Morgan Stanley, it is not clear if this signals a change in pricing power from the retailer to the consumer or if it simply illustrates a fall in input costs.
What is clear is that retailers that are able to offer good value are prospering. The success of Matalan and New Look are just two examples, while TJ Hughes the discount department store group underlined the trend with good results yesterday. In food, Asda has based its huge success on a low-price proposition.
An often overlooked point is the shift in the supply and demand equation. It should be stated that there is little wrong with demand for retail goods in this country. Official figures for August show that sales by volume were up by 3. …