Juicers are all the rage these days, the latest we’ve been made aware of being AlixPartners – no Nutri-Bullet perhaps, but more than capable of juicing the latest retailer to go under, Austin Reed.

With retailing peer BHS also entering administration in April with a buyer yet to be found (even Mike Ashley’s steering clear of that one), the demise of Austin Reed simply serves to compound already sour sentiment towards retail companies that aren’t keeping up with the Joneses. The pace of technological progress and the rise of internet shopping, not to mention an unseasonably warm autumn / cold spring (nowhere other than the UK will you find the weather blamed for things like this),  has meant that those that fall just a little bit behind have demonstrated that they’re perhaps worthy targets for short sellers.

In the same way that the final phase of a bear market is defined as the ‘panic’ phase, a period of sustained panic selling and accelerated share price losses to the point at which there are no sellers left, one may characterise the demise of the Retail laggards in a similar vein. The good news? Well, at some point you’re going to find some pretty good deals out there. It will be a buyers’ market. But yes, they’re good deals for a reason: No one wants to buy them. Why invest if you can’t sell your investment later on?

My father used to be an antique dealer. He likes brown (mahogany) furniture. When he was in business, he’d pay £1000s for a table, set of mahogany chairs or a chest of drawers. Luckily back then he could sell the stuff (he’ll probably say different, so don’t ask him). Now he picks things up at auction for £100s. The quality hasn’t gone down, it’s just that people prefer cardboard from IKEA these days so if he wanted to sell it, he’d have a job doing so. But that’s not to say that well known dandy Lawrence Llewelyn-Bowen, who my father thinks is ghastly, won’t come out tomorrow and say he’s ‘…really feeling brown furniture at the moment.’ He might do that. People like my dad are called ‘value investors.’

Unfortunately though, defunct retailers like BHS and Austin Reed don’t fall into the ‘brown furniture’ category described above. They’re not ‘nice things’ that are nice to have around. They’re more like the mk1 Jaguar my dad had years ago. Beneath the surface they don’t run properly and just cost money. The people who buy these sorts of things are called ‘fools.’ Luckily my father found a suitable one so he could cut his losses on the Jag, but since short selling became something people could actually do, fools have become few and far between.

At this point I’m unable to continue to compare equity investing to antique dealing, but I hope you get my drift. When things start to fall apart, there’s now an alternative to buying low. You can now sell high first, so if a trend is developing there’ll be speculators whatever the direction. The speculators will have noticed retail’s current predicament. Don’t expect BHS and Austin Reed to be the only isolated duo.

Augustin Eden, Research Analyst (31 May)