The retail sector’s recent strong share price performance may be outpacing reality, broker Altium has warned.
Altium analyst Dave Stoddart said that store shares’ rise in the first quarter was understandable given expectation of economic recovery next year and precedents.
But he cautioned: “We are not persuaded that those precedents accurately capture the risks and prospects of the current economic situation. We think there is further bad news to come, particularly relating to unemployment and consumer credit.
“We also believe that the recovery, when it comes, will be muted, a factor that should limit the valuation metrics applied to sector stocks.”
However, Stoddart added: “This does not mean the sector cannot continue to outperform. We simply question whether that outperformance will result in investors losing rather than making money.”
Other brokers have adopted a more bullish stance on the sector, which has risen 25 per cent since the start of the year. Seymour Pierce analyst Freddie George said:
“We believe there is still further upside to the sector.”