The outlook for UK consumer spending continues to be weak with disposable incomes under increasing pressure, driven largely by the cost of living rising faster than income growth, which in turn is exacerbated by the threat of ongoing public sector cuts.

So it is easy to draw the conclusion that general retail is doomed. While the headlines make such views understandable, we see it as much too simplistic.

We accept that the current environment will see the demise of some retailers, but also argue that it offers ample opportunities for those retailers prepared to adjust and adapt. Yes, the consumer is increasingly discerning, but surely it is the job of the retailer to ensure that it remains relevant in order to secure its own survival.

WHSmith is a case in point. Long derided as ‘a retailer that would not be created today’, it has been ahead of the curve in identifying the long-term decline in CDs and DVDs, before even the specialists, while growing its business in motorway stations, hospitals and workplaces.

Kingfisher is another example of a retailer adapting, by using excess space in its B&Q stores to pull in the trade customer. Additionally, Dixons has averted what was seen a few years ago as an inevitable demise, by completely overhauling its stores and product offering.

Moreover, price is not the only determinant of retail life; those clothing retailers that have focused on price alone have seen profits impacted the most.

Value it seems is top of the agenda, with consumers expecting their basics to last longer while spending on that ‘something special’ in this environment. Getting the mix right is the challenge that faces the retailer.

This is not the first time that retailers have been faced with a downturn in consumer spending. Arguably, like-for-like sales have been weaker in the past and retailers have adapted by managing stock levels more efficiently, reorganising production hubs and keeping costs under control.

This time is no different from previous downturns in that those retailers that adapt effectively will be rewarded not just by their survival but through their emergence as stronger entities with better positions in their respective markets.

Finally, if retailers have learnt anything during the credit crunch it is that cash is king. Retail, if managed effectively, is an inherently cash-generative business.

The best-in-class have returned significant amounts of cash to shareholders while also continuing with their investment programmes unhampered by negotiations for further funding requirements.

In a stock-pickers market, we would focus on the fundaments of each business with cash being the ultimate determinant of long-term viability.

Ramona Tipnis analyst, Shore Capital