Flight to quality is sign of hope on the troubled High St

In the name of beating expectations, the shopping industry engages in an annual game of predicting that the winter holiday season will be miserable. This time they might be right. The profits warning from Moss Bros this week was one of many signs of distress. Pubs group Regent Inns and restaurant empire Clapham House also faced up to the fact that economic reality is eating into sales.

Woolworths is feeling the most bruised. A note from Citigroup this week titled "In the bleak midwinter" had the punch of Ricky Hatton. It argued that a fair value for the shares may be zero, because Woolworths is "in a perfect storm of competition" and facing a "dire" future.

Management's multi-channel strategy might give Woolies breathing space, said Citi's Bruce Hubbard, but that's all it would be. This might be harsh, but with the shares at 14p there is not much equity left in this business. The chief executive, the able Trevor Bish-Jones, has a fight on his hands.

There is trouble elsewhere too. Sports Direct, the pile 'em high leisurewear chain, is lurching from City embarrassment to retail disaster. Yet another profit warning from Mike Ashley's outfit seems as inevitable as Christmas. B&Q owner Kingfisher saw profits slip in the third quarter to the extent that investors fear the dividend will be cut.

Retail bosses that are suffering blame these difficulties on factors beyond their control, such as falling house prices or England losing football matches. This is reasonable, but it ignores the fact close rivals to the strugglers are doing well. The flip side of Woolworths, Sports Direct and Kingfisher is WH Smith, JD Sports and Home Retail Group - - all of which are on the up.

What's going on? The difference seems to be a matter of class. Across the market, from pubs to restaurants to clothing stores, there is a flight to quality. People might be leaving their homes to shop, eat and drink less often, but when they do they want to buy a good brand in nice surroundings.

Shabby shops selling cut-price gear add to the feel-bad gloom that folk wish to escape.

Debenhams remains in the doldrums (it may be slowly emerging) while John Lewis goes from strength to strength. Last week's sales in John Lewis department stores were up 4.5% on a year earlier, with not a discount in sight.

Debenhams has already started having sales. Sports Direct is a permanent fire-sale.

Gavin George, retail analyst at Ernst & Young, says: "Everybody knows it's not good news to be discounting prior to Christmas."

Sir Philip Green, the Top shop to Bhs guru, said this week that shoppers are buying in a "very discerning way".

It is no coincidence that Moss Bros's response to falling sales is to move upmarket, citing the sqeeze at the lower end. Internet clothes shop ASOS which looks glossy, whatever the reality, has shown that strategy works. Sales are booming, with first-half profit tripling and sales doubling.

It's a tricky balancing act. French Connection is in a fix, perhaps because it has prices that are too upmarket.

At the top end, Burberry has worked hard to shake off its chav image and become a luxury brand precisely to avoid these downturns - the rich can still afford expensive gloves and scarves even in a credit crunch.

For the bottom end, the immediate future is not pretty. "We look to be heading into a non-food consumer recession," says Citigroup's Hubbard.

Posh shops, supermarkets and the best internet retailers will be OK. The rest may have to diversify into pick-pocketing.