And there is no end in sight to its woes.
"When technology moves as fast as it does in a civilization like ours, you get a phenomenon which I call competitive destruction. You know, you have the finest buggy whip factory and all of a sudden in comes this little horseless carriage. And before too many years go by, your buggy whip business is dead. You either get into a different business or you're dead -- you're destroyed. It happens again and again and again." (Charlie Munger)
The demise of the High Street is not a new story. Ever since the credit crunch the trend has been clear. But the story seems to be building to a crescendo.
The attack on the High Street has been two-pronged. On the one side, online retailers have been booming: the undoubted kings of online retail are Amazon and eBay, but other companies such as Play.com and ASOS (LSE: ASC) are also doing very well.
On the other side is the unrelenting advance of the supermarkets, particularly the colossal out-of-town megastores that sell everything from groceries to medicines to electronic goods to clothes.
Before the credit crunch it seemed that High Street retailers were valiantly and successfully holding off this invasion. But as the recession, increasing unemployment, tax rises and last, but not least, spending cuts have been taking their toll, several retailers have been pushed off the edge.
Famous names including Woolworths, Zavvi, Borders and Threshers have gone to the wall, leaving parts of the High Street resembling ghost towns. And I'm afraid I think there will be more victims to come.
Buggy whip businesses
The pain has been most intense in certain areas, particularly CDs, DVDs, books, computer games and electronic goods. These are all areas where consumers simply find it much easier to buy products online or from supermarkets.
Personally, it has been years since I bought a CD or a book from a High Street store. I find online shopping just so much easier, quicker and better value, not to mention the greater choice and the consumer ratings which help you choose products. Frankly, what is the point of trudging all the way to your High Street store just to buy a CD?
My argument is that High Street retailers in the particular areas I have given above are today's version of buggy whip businesses. Technology and business forces are gradually destroying these companies.
Just look at the share price of HMV (LSE: HMV). Six years ago it was over 200p. There has been a sense of inevitability as it has plummeted to 15p. Margins have been squeezed, sales have been falling, profits have tumbled and net debt has increased. The breaching of banking covenants may be imminent, and there is talk that Waterstone's will be sold to fill the funding gap, but even this may not be enough to stop the rot.
Then just last week there was a shock profits warning from Dixons Retail (LSE: DXNS), which owns the Dixons, Currys and PC World brands. Sales fell 11% in the first quarter of this year. The news caused the share price to slump even more. It is now at 12p -- 5 years ago it hit 600p.
Then there's GAME Group (LSE: GMG), which in January announced a drop in sales revenue of 12% in the UK and Ireland. GAME Group's share price has fallen from a 2008 high of 300p to 57p.
The bull case
Is there a bull case? Well, you could blame the UK's current economic travails for such poor performance from these companies. Once the economy improves, these shares might be seen as recovery plays.
Plus these companies have been making efforts to improve margins: HMV has been diversifying into live music, and Dixons have been revamping their stores.
At some point you could argue these shares will be so cheap they will become potential value investments.
Watch your fingers
Overall, however, I think there is a fundamental, longer term negative trend taking place here.
I remember considering HMV as a value stock late last year. At the time it was at 45p. If I recall correctly it was on a price/earnings ratio of about 4 and had a dividend yield in double figures: surely it was just too cheap?
But this value play has failed the test of time -- as it happened, earnings since then have fallen, the dividend has been slashed, and the share price is now 15p. In short, HMV is a classic value trap. Every time investors think the company looks cheap, it gets cheaper.
Admittedly Dixons and GAME are not yet in the same dire difficulty that HMV is, but their long-term future is uncertain, and I can see many other less risky value shares in the stock market today.
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