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MARKET COMMENT
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Great Titchfield Street, London -- The stock market is certainly a fickle place. Compare the recent performance of two of the UK's retailing blue chips, Great Universal Stores (LSE: GUS) and Kingfisher (LSE: KGF). Eighteen months ago you would have struggled to give away shares in GUS whilst Kingfisher was one of the darlings of the market. Today the exact opposite is true. Kingfisher's shares have slumped as investors worried about the group's focus and the apparent lack of firm decisions about the future of its Superdrug and Woolworths chains. Today's announcement that these operations are to be floated off, after constant speculation that they would be sold, does not seem to have helped the shares. Kingfisher's slump has gone against the trend of many retail shares in the last couple of years. On the whole they have seen healthy gains helped by high consumer confidence in the UK and investors seeking refuge from technology shares. GUS, on the other hand, has seen plaudits lavished on its management team as it attempts to follow much the same path as Kingfisher, in its case floating off Burberrys, which it confirmed today it plans to do within the next twelve months. It also said underlying profits rose 9% to £487m thanks to a robust performance from its credit checking business, Experian. Credit checking when the US economy is heading south certainly appears to be an attractive business. Spiralling consumer debt in the UK is unlikely to hurt either. The group's Argos and mail order operations are also performing well. Both companies now sit on similar valuations of around £6b. Both are valued at around 16 to 17 times earnings for their next financial year. But this tale demonstrates that reversion to the mean is one of the most powerful forces in the stock market. While some shares enjoy high price to earnings ratios for many years, in the case of most businesses it is often just a short holiday. Holidays are fun while they last but they always have to end. More: GUS discussion board | Kingfisher discussion board