Good morning!

More interesting news about the retail sector. I'm very fearful about this sector, and think it's generally best avoided at the moment. This is due to multiple headwinds - online is increasingly eating their lunch, plus overheads are rising fast (Living Wage, etc). The latest one - much higher input prices feeding through in 2017 due to weak sterling, could I think crush a lot of smaller retailers that have only just been hanging on. Plus margins are likely to be squeezed across the board, for all retailers.

This article makes some interesting points. There's evidence that consumers are tiring of buying "stuff", and are now prioritising holidays and entertainment (meals & nights out) ahead of adding to already groaning wardrobes.

All in all then, I reckon a lot of apparently cheap retailers could turn out to be value traps next year. So caution is definitely needed there. Which brings me on to probably my favourite GARP share at the moment, in a sector which is rapidly transitioning online.


Gear4Music (G4M)

Share price: 334p (up 5.7% today)
No. shares: 20.2m
Market cap: £67.5m

(at the time of writing, I hold a long position in this share)

Interim results for 6 months to 31 Aug 2016 - if you follow me on Twitter, then you'll already know that this is probably my favourite GARP (growth at reasonable price) share at the moment. The company is an online retailer of musical equipment. It operates about 17 websites across Europe, with the UK being the biggest market. It's based in York, and has been established for about 13 years. The founder CEO is still by far the largest shareholder.

The stock market is attributing very high valuations to growth companies. I'm not saying that is necessarily correct (as I think some valuations are too high now). However, if you spot something with outstanding organic growth, then it can pay to pile into it whilst the price is relatively cheap, because the rating is likely to expand dramatically once other people also spot it. That worked brilliantly for us with Boohoo.Com (LON:BOO) between Jan 2015 and now, I know a lot of readers joined me in that one (which I no longer hold personally, as the price seems quite high now).

For me, G4M is not dissimilar, although it's more niche. So some people question…

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