Rewind to just over two years ago, when coronavirus had just arrived on these shores and everyone was quickly ushered into a lockdown, including the high street.
At the time, with no end in-site, it seemed that shops like Next PLC (LSE:NXT) (Next PLC (LSE:NXT)) and Sports Direct, owned by Frasers Group PLC (LSE:FRAS), would be hit hard by the severe lack of footfall in towns and cities across the country.
However, with the pandemic now being treated as a thing of the past, high street favourites such as Next have started to come out the other side and are seemingly thriving.
Next reported that retail sales were up 285% on last year, and only slightly behind the last Covid free reporting year.
Online sales didn’t suffer too much either, only down 11% from the Covid-boosted last year, but up 47% on 2019-20.
In fact, add in the war in Ukraine, rising costs and soaring inflation hitting the margins of most retailers, to see the FTSE 100 listed company stand strong and maintain its guidance after its first-quarter results underlined why it is UK retail’s shining star.
The outlook for the online retailers, like Boohoo Group PLC (AIM:BOO) and ASOS PLC (AIM:ASC), is different, however.
Both have been heavily stung by macro-conditions which have battered away at profits and margins.
With Next’s share price going in the opposite direction to that of Asos since the onset of the pandemic, it begs the question as to whether the high street is still alive and here to stay?
High street evolution
Michael Murray, who will be replacing his soon to be father-in-law Mike Ashley as chief executive of Frasers Group, nee Sports Direct, is already laying down big plans to move the company forward.
He intends to open 10 more stores across the UK, with the 32-year-old a firm believer that the high street isn’t dead, telling the BBC ahead of the opening of its new flagship Birmingham Store “If you give people a reason to come and shop, they will shop.”
Sports Direct’s new store may be a glimpse into the future for the high street to ensure it can keep customers walking in.
Birmingham and future sites will have an e-sports gaming room, sports bra fitting services, a game concession as well as other things you don’t assume with a traditional shop.
According to Emily Salter, a senior apparel analyst at GlobalData, the direction Sports Direct is taking is one that most high-street stores will follow.
“The high street will continue to evolve, with less of a focus on traditional shops and a wider mix of uses, including leisure, housing and social enterprises,” Salter said.
“Shops will still be present and important, but many will be more like showrooms and spaces where shoppers can interact with retailers, as well as being used to support online sales, with less of an emphasis on making sales.”
John Stevenson, a retail analyst at Peel Hunt adds that stores need to adapt and offer more than simply just a product on a shelf or a rack otherwise “there’s no reason not to buy stuff online.”
“Look at Selfridges, where it's been able to create a dynamic environment that gives a reason to go in-store, that’s what retailers are trying to do.”
“Ultimately, the consumer doesn’t care where they’re buying it from.”
Further tough times
One of the high street’s big names, Primark, part of Associated British Foods PLC (LSE:ABF), warned recently that it would have to up prices to protect margins as the war in Ukraine and rising inflation continue to affect every facet of the business.
That is something that most retailers will arguably have to do at some point, and that could seriously affect company’s already operating on tight margins.
Analysts at the time warned that Primark may risk losing out on its core customer base, chipping away at sales.
While Next actually managed to increase full-price sales by 22% compared to the same period last year, that isn’t to say all the others will be able to do so.
During tough economic times, spending on unnecessary items is often the first to go, and fashion retailers, in particular, may find it tough.
Is the high street thriving?
Whether the high street is thriving or not really needs some context.
Yes, it has experienced excellent recovery since the lockdown period ended, but that was to be expected as customers had the urge to get outside once again.
The real test will be to look at the numbers a year from now and see whether footfall in the cities has remained strong.
Also, where people are going is key.
Local towns and markets have seen greater levels of footfall in comparison to pre-pandemic levels, according to Stevenson, simply because they were much more accessible than big city-centre shopping centres.