Some retailers are facing Christmas cheer, while others are looking at a New Year hangover.
Heading towards the end of the year, a year which has been a traumatic one for many in the retail sector, which companies are looking forward to a happy holiday and which are facing their bleakest midwinters?
The Losers
JJB Sports and Topps Tiles, both of which have had their moments of popularity with small investors over the years, are in this year's list of shrinking retailers.
Expansion and falling sales
JJB felt the bite of the recession painfully, coming hard on the heels of an expansion phase that saw the company opening new stores at a fair rate of knots, but building up large debts in the process. And when sales turned sour, that gearing turned into a near-killer, although the sale of its fitness division and a recent rights issue has made its cash situation much healthier. From a pre-tax profit of £40m a few years ago, JJB is expected to turn in a loss of £50m for the year ending January 2010, and the share price, at around the 30p level, is way down from its lofty 265p height of 2007.
Meanwhile, Topps Tiles, Britain's biggest tile and wood flooring specialist, is expecting profits to be down more than 50% this year, with only a modest rebound forecast for 2010. At the half-way stage in March, the company was saddled with £85m of debt. That's down from the previous year-end figure, but is still something of a millstone for a company with falling sales and a market cap of just £160m.
What dividend?
Findel, owner of household goods distributor Kleeneze, is expecting a fall in earnings per share of around two thirds by April 2010, and a further 20% the year after, and that comes after two previous years of falling earnings. And with debts soaring to twice the company's market cap, it would be a fool (not a Fool) who expects the company to maintain this year's 4% dividend, especially as that was slashed from the previous year.
But what about the winners?
Bucking the high street trend, online purveyor of fashion, ASOS, holds the top spot for the fastest-growing retailer this year. With sales predicted to grow 61%, £13 million of net cash, and a market value of £300 million, ASOS appears immune to the fashion industry's woes.
JJB's rival, JD Sports Fashion, has seen its share price storming up this year, after the company posted its fifth consecutive year of rising earnings. Though earnings are expected to be flat for the next couple of years, the company's next cash of £25m means it has a rosy New Year to look forward too. Ashley (Laura) Holdings is in enviable position too. Despite being another company that is often at the whim of fashion, sales are growing nicely and the company has a nice bag of cash.
Is debt all bad?
In defiance of its huge debts, which stand at more than half the value of the business, Debenhams may be one of this year's Christmas surprise winners. Sales are rising this year, though they are expected to dip a little next year, so I wouldn't be turning a blind eye to that debt any time soon.
What do we learn from all of this?
Well, falling sales and profits alone are not a great problem for a well-run business, and every company should expect some lean years. And at the same time, financing a company through debt can be profitable, providing the company is actually growing. But combine the two -- a slowdown in business coupled with an expansion of debt -- and you're staring trouble in the face.
More from Alan Oscroft:
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