Another week, another piece of research published on the health of the retail sector.

My colleagues in KPMG Restructuring launched the 'Retail Distress Tracker' last week, a piece of research which analyses UK companies facing stress in areas such as cashflow, potential covenant breach, profit warnings and refinancing.

By Helen Dickinson

Based on a broad range of relevant market sources on private and public companies, the research explores which sub-sectors of retail are under the most pressure at the moment.

I doubt it will come as an enormous surprise that retailers selling homewares or home improvement products - making up 35 percent of tracked distressed companies - are having a great deal of difficulty selling to plan at the moment.

While the UK was gripped by home improvement fever only a year or so ago in the midst of the buoyant property market, consumers are now turning their backs on furniture and other large ticket items for the home.

Although some DIY companies may benefit from consumers looking to improve their home rather than move, the business model requires the sale of high volumes of stock to achieve profitability and this is a conundrum with no obvious short-term solution.

Clothing, shoe and jewellery retailers make up the third largest category of retailers in distress, accounting for 23 per cent of organisations in the research, suggesting that consumers are thinking much more carefully about spending on non-essentials. This sector has seen a large amount of promotion lately but it's not necessarily a tactic which can work for all. Jewellery companies in particular find it difficult to offer discounts due to external factors such as the price of gold remaining resilient.

The retail distress tracker also shows that certain businesses in the food and drink sector - perhaps surprisingly given that this area tends to hold up well as non-discretionary spending - are struggling to cope with the economic downturn, making up 25 percent of the total retail figure.

It suggests that smaller food and drink retailers, from local grocery stores to upmarket wine sellers, are experiencing declining sales. While the main supermarkets have been adept at meeting the changing needs of their customers and, as such, have bucked the downward retail trend, small chains of retailers lack can lack the clout of their supermarket competitors to squeeze wholesalers and change their product offering in a short timeframe with the speed of their larger counterparts.

The research paints a picture of the types of companies which have traditionally been seen to be more at risk, from the experience of previous recessions. However, the key difference this time around is that many are failing or at risk of failing so early in the cycle and this is down to the fact that this recession is credit - not consumer - led.

Of course, recessions create winners and losers and when companies fail it provides those left behind an opportunity to 'soak up' the surplus demand. And despite the gloomy outlook, there is still a chance to outperform by staying true to the business's core values.

I've made the point before within this column, but knowing what the customer wants and constantly changing the model to reflect this is the key to survival in these turbulent times.

Helen Dickinson is Head of Retail at KPMG