Margin squeeze to put pressure on retail stocks

While there is little in the way of domestic events to influence the local market, the AMP Capital Investors chief economist, Shane Oliver, says retail stocks, which have been pounded in the past fortnight, will be one item of interest.

"If there has been any pick-up in spending, it could be seen as a positive thing and they could have a bit of a recovery," Dr Oliver said yesterday. "Retailers are the ones that might be most volatile."

A slew of companies issued earnings downgrades or presented bleak outlook statements in the lead-up to Christmas. Kathmandu, Billabong, JB Hi-Fi and David Jones had said they expected trading to be weak during the Christmas period.

Dr Oliver said anecdotal evidence from some retailers suggested sales were at similar levels to last year's Christmas trading. "They are selling more volume, but the total revenue sales figure was the same as last year, so the margins have been squeezed," he said.