It is hard to believe that less than three months ago, as he posted interim results, ScS chairman Mike Browne was “confident of a profitable second half”.

He did warn that ScS’s management were “under no illusions about the challenging conditions prevailing in our market”. But the challenge has turned out to be the sort faced by a hedgehog as an HGV bears down at 70mph.

Like-for-likes have been in freefall and ScS is in talks over additional working capital after last week’s withdrawal of credit insurance cover for suppliers (analysis on page 16). Rival Land of Leather, in a similarly parlous state, was expected to reveal new fundraising as Retail Week went to press.

The Land of Leather proposals being worked on already had the backing of shareholders speaking for more than 50 per cent of shares and the mood in the City was more positive – although hardly euphoric – towards it than to ScS.

Among the problems ScS faces is that it has few assets to borrow against, which may make new financing more difficult to pull off than for Land of Leather – not just from conventional sources, but from the new breed of alternative providers such as asset-based lenders.

But there’s an interesting connection between ScS and Land of Leather that could be pivotal. The link is Nicholas Berry’s Stancroft Trust. The investor has built a 15 per cent stake in Land of Leather and controls 9 per cent of ScS. So far, it has remained silent on its rationale. The City whisper, however, is that Stancroft has previously had a stab at a deal involving the two sagging sofa firms, but was rebuffed.

Whatever the way forward for ScS and Land of Leather, the suspicion must be that Stancroft may be at the heart of it – whether it’s quids in or takes a bath.

Cause and effect

Retail’s fall from favour with investors continues to be mirrored within the broking firms that follow the sector. We reported a few months back on changes to the teams at Merrill Lynch and others. Now Panmure Gordon has become the latest to scale back.

Veteran sector watcher Christian Koefoed-Nielsen and the broker have mutually agreed to go their separate ways – partly, it is understood, reflecting lacklustre investor interest in stores at the moment. Koefoed-Nielsen’s colleague, the forthright Philip Dorgan, will now provide all retail coverage.

George MacDonald is deputy editor of Retail Week

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