Jessops Bust – Who is Next? How can you make money from it?

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Camera store chain Jessops is appointing an administrator as it is effectively bust. What caused this privately owned firm to go under and who is next? As it happens I bought a camera from Jessops just before Christmas and as I did so I wondered why on earth this store existed in the first place. That should not detract from the issues the entire High Street faces.

© Image copyright nirak

Jessops had a particular issue. If you are a serious photographer in recent years you ordered your high end kit online as Jessops probably did not have it in stock ( certainly not at the Stratford upon Avon branch) and online specialists were cheaper. If you were an ordinary Joe you twigged that you could take photos on your phone and so did not need Jessops anyway. The bottom line a Jessops store was about as much use as a typewriter store.

But there is a wider issue. The UK non-food consumer high street market is shrinking year on year thanks to a) more folks shopping online and b) the supermarkets selling more non-food items. Everything Jessops sold you could buy at Tesco. Both trends will continue. And that has a knock on effect in that as small town centre shopping areas suffer ever reduced diversity of offerings more and more folk will opt for the convenience of online shopping/Tesco – it is a vicious circle.

Then we come to the short term issue of consumer spending. As I predicted, Christmas was poor and it is not goi9ng to get any better. Trade at any consumer facing company  ( except where it is a trade-down option)  will be tough this year as folks worry about their jobs and start to twig that they are overborowed and at some stage interest rates will go up. As house prices fall- as they inevitably will – they will feel poorer and rein in more.

Right now retailers have just paid the December quarter rent payment. In the January sales there is a desperate dash for cash (hence the brutal markdowns) but it will not be enough. My guess is that the next three months will see more and more outlets hit the wall. The big bloodbath will come in March as the next quarter’s rent cheque becomes due.

I outlined these thoughts in my macro-predictions for 2013 article on Boxing Day. Sadly this one is already vindicated. You can read the full set of macro calls here

Some retailers will go bust others will suffer. If you are looking for an obvious casualty this is one I flagged up a few days ago (already partially vindicated with a dire trading statement) but there is worse to come.

On the long tack, look to buy into the trade down options. The most obvious one has again already vindicated my faith with a cracking trading statement here.

Generally retail is for both structural and cyclical reasons a sector best avoided for now.

Tom Winnifrith writes for 10 UK and US websites and is one of the twenty share tipsters contributing to the new service. If you want a free share tip emailed to you each working day all you need to do is register HERE with onefreesharetip now.

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