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Schroders’ Buxton: Patience needed for high street investment

Opportunities for investment will arise in the UK retail sector, despite harsh conditions blighting the high street, according to Schroders’ head of UK equities Richard Buxton.

Buxton, who manages the £2.9 billion Schroder UK alpha plus fund, says “all is not well” in the sector and expects this to continue for some time to come.

He highlights the fact that retailers such as Jane Norman and Habitat recently went into administration, HMV is selling off Waterstone’s in a bid to cut debts and Carpetright suggested it might close stores.

“After a boost to clothing sales from the early summer sunshine in April, trade has slowed through May and the return of rain in June has accelerated the decline,” Buxton adds.

Figures from the British Retail Consortium support this view, showing that May’s sales were 2.1 per cent lower than those one year before. The group says consumers are increasingly reluctant to spend in the current economic climate.

Buxton also predicts this subdued consumer environment will continue for several more years, which will result in more retailers reducing in size or dropping out of the market completely.

But he claims that pressure on the consumer, such as VAT increases and rising unemployment, are close to their end, which will benefit stores willing to invest in advertising and hiring.

“If as a UK retailer you have a strong balance sheet, experienced and cautious management and a sustainable franchise, then you will survive the current tough times,” the manager adds.

“For the patient investor, there will be great opportunities on the high street in the coming years.”

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