Impact of recession on Retail Industry

After banks, steel companies, auto makers, the recession seems to have started showing its effects on Retail industry. Let us first look at some US retailers before we get to Pantaloon Retail, one of the leader retailers in Indian Market.

update: this is the latest from BBC

More than 10 national or regional retail chains risk going bust next month, insolvency experts are warning.

Circuit City (consumer electronics) has already filed for bankruptcy more than a month ago.
The filing comes one week after the 59-year-old retailer said it would close 155 U.S. stores, or more than one-fifth of its retail base, and cut 17 percent of its U.S. work force.

Best Buy (consumer electronics) reported a 77% drop
"We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace," the chief executive, Bradbury H. Anderson, said in a statement.

Now let us look at Pantaloon Retail which is still trading at a relatively high P/E of around 25. There is no specific bad news, but already the company shows around 38% drop in the 2008 consolidated annual results declared 'long ago'.

The consolidated results for the Year ended June 30, 2008
The Group has posted a net profit after minority interest of Rs 219.30 million for the year ended June 30, 2008 as compared to Rs 355.40 million for the year ended June 30, 2007. Total Income has increased from Rs 35654.80 million for the year ended June 30, 2007 to Rs 58665.00 million for the year ended June 30, 2008.

I have no idea how the stock reached a peak of over Rs. 850 in the past one year. Pantaloon Retail is one stock which I would like to enter at a suitable point of time. Not at the current 'high price' though.

Dec 23, 2008

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