I agree with the sentiment regarding retail. Ecommerce is just 10% of the total spending right now, which means that the pain has probably just begun. I can easily see that more and more produce categories will be dominated by ecommerce (even groceries to some extend) and I am fairly certain that will grow to 50% of the total within 20-30 years.
Also, when looking at retail stocks balance sheet, that the main liability are the lease liabilities (for future rent payments), which typically don't show up in abbreviated balance sheet, just in the footnotes. If you add those liabilities back in, the leverage of many retail companies becomes fairly substantial.
I agree that cloth designers like RL should find a way to distribute their product even in an ecommerce dominated world, even if their man distribution channel, which are department stores suffer right now.
My only buys right now are retail oriented Reits, where I think we have substantial discounts to NAV value and improving balance sheet, but if above scenario of an ecommerce dominated retail becomes true, even those may turn out to be value traps.
Most value investors underestimate the discount necessary to account for secular headwinds /melting ice cube business. |
