Monday, December 10, 2007

Retailers are having a Christmas sale

New Zealand Retail stocks are getting a real bashing at the moment and it seems the market sentiment for this is a lot of media attention about "price slashing" sales before Christmas.


Of course there is good reason to believe that margins will be affected because of discounts. Couple that with the high interest rates, a low US dollar impacting on NZ retailers with an international presence, uncertain seasons driving apparel retailers crazy and gas prices that have had a negative impact on sales through 2007 and you are going to see downward share price movements.


A Hallenstein's store interior


2008 probably isn't going to be much better, with more of the same experience from 2007, so you could see retail share prices continue to go south.

In my opinion though the market has overreacted to the negative news and there are some bargains to be had in retailing stocks.

Hallensteins Glassons, which I'm thinking of adding to my portfolio and has a dividend of over 10% net, hit a low today of NZ$3.84 after hitting the mid 5 bucks earlier this year, while Pumpkin Patch has sunk to $2.60 after almost reaching the magic $5.00 mark only months ago.

Before the High Court dismissal of the Commerce Commission decision to reject two prospective buyers of The Warehouse, its share price was drifting below 5 bucks and that companies sales have slowed and margins contacted and 2008 looks flat to ordinary.

Postie Plus made a loss earlier in the first half of this year and directors are pessimistic for the festive season, while Briscoe Group took a hit to their profit with a 15% dip in recent earnings.

The pressure hasn't hurt the likes of Michael Hill or Restaurant Brand's share prices too much in comparison to others, in fact RBD share prices has gone up while MHI share price has come off recent highs even though profit is up for the year.

That surely shows that market sentiment is punishing retailing stocks down too far.

Like every other sector of the economy retailing has its ups and downs and it is flat to negative at the moment but it wont last. Just like the sales that the retailers are having now and will have over the summer period, retail stocks are having their own sale.

Its up to you which retailer you are going to buy but it really makes sense to add to the long term portfolio when there is a sale happening.


Disclosure: I own Micheal Hill, Warehouse, Postie Plus and Pumpkin Patch shares


Related Share Investor reading

I'm buying
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills


From Amazon

The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy

The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy by Richard Vedder
Buy new: $15.00 / Used from: $3.65
Usually ships in 24 hoursg


c Share Investor 2007