It looks as if 2008 may be the year of living dangerously for retailers.

For months, the evidence has pointed to hard times on the high street as interest rates, the Northern Rock crisis and falling confidence progressively undermined store sales. The industry might have scraped through Christmas, but the real test may be yet to come. Analysts’ forecasts for this year vary in the detail, but the broadly bearish theme is the same. Whether like-for-likes this year slide or stay flat – fingers crossed they’ll rise, retailers will be feeling the heat.

There are defensive companies in the sector, in particular the big grocers, but many retailers’ success is at the mercy of consumer sentiment. The challenge will be either to come out among the best of a bad bunch or – the mark of a truly great retailer – to adapt to unsettling conditions so successfully that profitable growth is maintained.

At the top of some of the big retailers there is new talent such as John Browett at DSGi and Chris Ronnie at JJB, and it will be fascinating to see whether their fresh approaches will reap rewards in this climate. On the other hand, those retail leaders a bit longer in the tooth may find their personal stock is highly rated as investors seek out experience to see them through any downturn.

Either way, this year won’t just be about the spreadsheets. When life is tough, investors are likely to look into the whites of their eyes of the store chiefs their money is riding on and hone their judgements on what they see there.

There’s life in Debs yet

After asking analysts to stick their necks out and pick a stock for 2008 (see opposite), it would be churlish not to do the same.

At the risk of prompting derision from some quarters, but on the back of its recent record lows Debenhams looks like an interesting play.

It has a strong management team determined to get back on track. Chief executive Rob Templeman is one of the shrewdest operators in the business, while former George at Asda boss Angela Spindler should bring more fashion know-how.

Anecdotal evidence suggests that concessionaires and partners have been impressed by the attitude demonstrated by their contacts at the retailer, which bodes well.

Finally, there’s the bid interest. Surely 2008 can’t be as bad for Debenhams as most of last year was?

George MacDonald is deputy editor of Retail Week