Sell-side analysts have not lifted their EPS projections for the discretionary retail sector for over four years now

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Livewire Markets

Sell-side analysts have not lifted their EPS projections for the discretionary retail sector for over four years now. Independent research from Evidente ((VIEW LINK) suggests that the sector's forecast profitability is at the same level it was in 2005. Livewire asked Steve Black from Pengana Emerging Companies Fund to share some of the insights he had gained on opportunities/challenges facing the sector. Black says, History shows that the best time to own specialty retailers is when they are taking the low risk approach to growth by rolling out stores. When the rollout matures comparable stores growth tends to slow and under the weight of ever rising rents and wages and profits can falter. So yes the retail stocks can present good structural growth stories for a while but require monitoring for when their roll out begins to tire after which they may become low growth cyclical stocks. We don't currently own any discretionary retailers in the portfolio.


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