Comment: Retail stock prices - a guide to la-la land

Look at the retail stocks in the FTSE 100, in percentage terms, over the last 30 days and it is a mild surprise. Morrisons, Sainsbury’s, Next, Kingfisher and even Tesco are all down. Only Burberry proved a riser and given that it is not a high street operator, perhaps the rules that govern its performance may be different. Yet given all of the noise there has been of late about retail recovery and how the July weather delivered a shot in the arm for retailers, you might scratch your head and wonder.

The thing we are always told is that the market is forward looking in its stance and the prices that you see today probably refer to a valuation months hence. Yet even allowing for this, it does seem odd - more so when you consider what’s going on at the moment. Tesco is supposed to be resurgent, Sainsbury’s is meant to be on a high and even Morrisons, which has not been entirely immune to criticism, has been doing a lot to put things right. Then there are the non-food stocks. Next is usually a bellwether for the sector and the phrase ‘steady as she goes’ might spring to mind. And Dixons has been doing well on the back of the rapid erosion of its competitors and its ongoing store transformation programme, evidence of which can be seen in the Dixons Travel outlet at Gatwick’s South Terminal and, imminently, at the refurbished store in Bluewater.

So put another way, the biggest retailers by market capitalisation are performing reasonably, they are all taking steps to ensure that the face they present to the shopper has continued appeal and they are operating in an environment where consumer confidence is rising.

Somewhat counter intuitively therefore, the market seems happy to ignore this backdrop and to put a price on the shares that might make you think that as one door shuts another closes. This is almost certainly not the case, whether you consider the situation as it is today or as it is likely to be in the run-up to Christmas. Currently, there are many good things about our high streets and the biggest retailers are working hard to present shoppers with attractive options. Could it just be that the usual plague of short sellers coupled with the market’s inherent pessimism means that UK retail PLC is undervalued?