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Shoppers pass a Burberry store in Zurich. The company’s fiscal third-quarter retail revenue jumped 14 per cent, fuelled by double-digit gains in Asia. Investors responded to the news by driving it to the top of the FTSE 100 index.
Shoppers pass a Burberry store in Zurich. The company’s fiscal third-quarter retail revenue jumped 14 per cent, fuelled by double-digit gains in Asia. Investors responded to the news by driving it to the top of the FTSE 100 index.
(ARND WIEGMANN/REUTERS)

Cracks appear in foundation of ‘global luxury complex’

Despite the well-publicized woes of such U.S. chains as J.C. Penney Co. Inc., Sears Holding Corp., Macy’s Inc. and Best Buy Co. Inc., retail stocks have been on such a roll that valuations are looking as stretched as a pair of Lululemon’s yoga pants.

Retail “has gotten out of control,” argues Jared Dillian, a former Wall Street trader who publishes a daily market commentary. “My original thought was that inflation would take over and the retailers would find their pricing power and the stocks would go to the moon; but as it turns out, retailers had pricing power without inflation and the stocks went to the moon anyway.”