Sunday 14 May 2017

Investors Abandon Retail

Share market investors can be pretty cut throat. There is little room for sentiment when your financial future is involved and the traditional retail sector is certainly suffering as investors abandon the industry for greener pastures.

And who can blame them? This week has seen many key US retailers reporting their latest performance and there is little joy. Nordstrom, Macy's, and J.C.Penney were all down last week, with the latter two showing more than 30% decline in their share price year to date.

It is interesting to read the analysis from share market commentators as they encourage their clients to move out of retail. Here are some key factors -
1.     E-commerce is on the rise and the association between e-commerce and traditional retail is at best confused.
2.     Mobile shopping or pre-shopping is on the rise and price becomes paramount.
3.     Millennials are growing in influence but they spend less than other groups and they are distrustful of traditional forms of advertising.
4.     Baby boomers heading into retirement are growing in number and retirees spend less than workers. The global population is ageing.
5.     Global wage growth (spending power) has slowed.
6.     Endemic decline like this could be long term.

Obviously the investment sector doesn't see a big future for retail but of course they simply respond to trends, they don't determine outcomes. It is the job of retailers to make sense out of change and create a new way forward. Investors can thank us during the next retail bull run.