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Does size matter in the UK retail sector?

With news that JD Sports may potentially look to merge with JJB Sports, many are starting to ask whether size matters on the UK high street in an attempt to secure safety in the medium to longer term. There seems to be a general misconception that it is only the smaller companies which are suffering when we have seen the likes of MFI, Woolworths and other major players in the UK high-street inform the market of their troubles.

The main issue for the retail sector is balance sheet strength and a company's ability to remain competitive, retain sales and ensure good cash flow in the short to medium term. Even many of the larger UK operations are struggling to maintain their cash flow and when DSG International (the owner of Dixons, Currys and PC World) is struggling then we really know something is wrong.

It will be interesting to see what happens over the next few weeks and months and whether a number of these small to medium-size companies begin merger talks in order to try and strengthen both their balance sheets and their spread of retail products. Those who make it through the Christmas period unscathed may well look at their options in the New Year.

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