Brokerage house CLSA has reiterated it 'sell' recommendations on retail chains Titan, Pantaloon Retail and Shoppers Stop, saying the profit margins would be under pressure in the foreseeable future because of sluggish economic growth.
Brokerage house CLSA has reiterated it 'sell' recommendations on retail chains Titan, Pantaloon Retail and Shoppers Stop, saying the profit margins would be under pressure in the foreseeable future because of sluggish economic growth.
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Brokerage house CLSA has reiterated it 'sell' recommendations on retail chains Titan, Pantaloon Retail and Shoppers Stop, saying the profit margins would be under pressure in the foreseeable future because of sluggish economic growth.
Brokerage house CLSA has reiterated its 'sell' recommendations on retail chains Titan , Pantaloon Retail and Shoppers Stop , saying the profit margins would be under pressure in the foreseeable future because of sluggish economic growth. According to the brokerage, valuations of the three stocks are expensive because demand is unlikely to pick up any time soon, and market may be expecting too much from the recent approval for foreign direct investment (FDI) in the retail sector. Retail shares have rallied between 14-52% over the the past month.
Here are 7 reasons why CLSA feels retail shares cannot sustain current valuations.
* A strong rebound in retailers' profitability needs to be driven by an acceleration in same store growth. * Past trends suggest that happens in periods of high real GDP growth (8%+); something that is unlikely in the next year. * Same store sales growth has been hovering in low single digits or even negative for leading formats. * Segments like jewellery facing headwinds. Broader indicators of discretionary demand like car and two wheeler sales also subdued. * FDI in retail a broad positive for the sector, support from limited states will cause deals in existing formats to be substantially delayed * Valuations are stretched at 28-39 times FY14(estimated). * Expect September quarter earnings to be tepid for the sector with Shoppers Stop and Pantaloon like to report 43-74% declines in profitability and Titan's earnings growth at 11% on an already soft base.
