Retail: Wheat from the chaff

The General Retail Sector hit a 10-year high in valuation terms during 2015, but was unable to convert rising disposable income trends into earnings upside.

Indeed, forecast expectations continue to fall, with consensus estimates cut by another c5% over the past six months. The de-rating over 2016 YTD provides an attractive entry point for a number of genuine structural growth opportunities and compelling recovery stories. Beyond these, we would continue to avoid the mid-market mature stocks that lack the top-line catalysts to offset the pressures of the Living Wage and online investment.

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