We are used to seeing doom and gloom on our own high streets but with US retailers shedding $50bn in market value yesterday, it’s not all rosy stateside either.
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Gloom from retailers like Gap, L Brands (owner of Victoria’s Secret) and bookshop chain Barnes & Noble contributed to a 3.4% fall in the S&P Retail Index yesterday. Companies that are feeling pretty confident for the season didn’t manage to escape the pummelling either.
This is obviously a hot topic as we head towards Black Friday – and it seems that it’s not just UK retailers who are feeling nervous at the beginning of the holiday season. Target, Kohl’s and Ross Stores all fell by around 10% in trading as Gap personified the gloom by saying that it was reviewing its store portfolio for closures.
Naysayers are worried about the effects of rising wages because of a tight labour market, narrower margins (an attempt to stay competitive with e-tailers like Amazon) and higher freight costs as well as potentially high levels of inventories that will have to be sold off at a discount in the coming months.
I think that there is definitely upside risk to both UK and US retail stocks as the majority seem to be fearing the worst.