Stockmarket investors rejoiced last year as the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) delivered a gain of more than 15% – its best annual performance since 2009 – but it was investors in the retail sector that recognised some of the greatest gains.
The specialty retail sector soared by more than 60% over the last 12 months, spurred by strong rallies from companies such as JB Hi-Fi (ASX: JBH), Harvey Norman (ASX: HVN) and Nick Scali (ASX: NCK), which each climbed between 65% and 108% in 2013. The question on investors' minds is whether or not there are further gains to be made, or if they should get out now while the price is high.
There are certainly positive signs for retail stocks for the year to come. Figures released by the Australian Bureau of Statistics on Thursday showed a seasonally adjusted spending-rise of 0.7% in November, while analysts had been expecting just 0.4% growth. If that wasn't enough, sales in the post-Christmas period were expected to hit $15.1 billion this year, up from the $14.8 billion spent the year before.
Consumer confidence is on the rise and a number of economists have pegged interest rates to fall further this year, which would imply that share prices could continue to recognise gains. However, investors should be wary of relying too heavily on monthly figures and instead wait for trading updates from companies they like – many of which will report in February.
Foolish takeaway
While Harvey Norman is one of the more attractive retailers at today's price of $3.24, Myer (ASX: MYR) is also a good prospect. At its price of $2.76 per share, Myer offers a trailing fully franked dividend yield of 6.4%. Although its online store caused headaches over the post-Christmas period (an error which rival David Jones (ASX: DJS) capitalised on), the company should continue to improve margins as consumer confidence increases.
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