Markham Lee_

Are Retail Stocks Bargains?

This looks to be a case where an analysis based on fundamentals (buying stocks based on historical valuations) creates a value trap, due to the exclusion of the macroeconomic factors at work. A lot of the retail growth over the last 5 or so years was generated by people abusing credit, whether that credit came in the form of Plastic or HELOCs, especially the latter. Take HELOCs out of the picture and there is simply less money available to drive retail growth and the YoY earnings will probably decline.

Factor in energy prices, healthcare and a consumer credit bubble and the outlook looks rather dismal for retail.

-M