Will it be a tough 2015 for Myer Holdings Ltd, PAS Group Ltd and OrotonGroup Limited?

If you are a shareholder in a company operating in the retail industry it’s likely that you’ve got that sinking feeling.

There has been a spate of recent downgrades from retailers with the latest confession coming from the recently listed PAS Group Ltd (ASX: PGR). PAS owns a wide range of well-known apparel labels including Black Pepper, Review and Metalicus, as well as holding domestic licenses for an expanding range of internationally recognised labels such as Paul Frank and Mooks.

The announcement from PAS noted that recent trading conditions had been more challenging than expected with management forecasting that profits for the first half of financial year 2015 will be around 30% below the prior corresponding period.

Adding to the concern for investors was the heavy reliance management is placing on the second half – generally the weaker of the two amongst most Australian retailers – which has limited the new FY 2015 guidance to only being down 15% on the prospectus’ original forecasts.

Concerns are running high amongst numerous other retail stocks too

The opening of leading cosmetics retailer Sephora in Sydney is expected to bite into department store Myer Holdings Ltd (ASX: MYR) high margin cosmetics business. It’s another strike against the leading retailer which is also battling weak consumer sentiment and online competition. Myer’s shares are currently trading at a new 52-week low.

Meanwhile luxury manufacturer and retailer OrotonGroup Limited (ASX: ORL) has hosed down expectations at its recent annual general meeting (AGM), after stating that it expects first half earnings to be lower than the prior year. Investors marked OrotonGroup down with the share price dropping from around the $4 mark back to $3.60.

From a value point-of-view there are certainly some reasons to be attracted to the beaten-up retail sector, however with little sign of an uptick in earnings for most operators it might be more like next Christmas rather than this one before there is some cheer for shareholders.


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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.


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