City bullish on retail stocks as it focuses on recovery potential

However, Panmure Gordon reiterated its buy advice on the sector and said: “We are not yet at the point where we do not care what 2009/10 brings in terms of earnings, but we are getting close.

“The Christmas trading updates demonstrated that share prices have discounted a lot of the bad news and that the market is focusing on recovery earnings potential.”

Panmure has upgraded Carpetright from sell to buy, and both Kingfisher and Next from hold to buy.

Seymour Pierce was also bullish on Kingfisher, despite the DIY retailer’s share price fall since early February. The broker said: “It has significantly underperformed the other cyclical stocks in the sector and, in our view, is oversold.”

Troubled JJB Sports’ standstill agreement with lenders is scheduled to expire on Monday. The retailer said this Monday that it had received “a number” of second round offers for its fitness clubs division. A successful disposal of the clubs is central to restoring JJB’s fortunes.

UBS maintained its buy stance on electricals group DSGi after the retailer’s update on the performance of remodelled stores. The broker still assumes DSGi will suffer double-digit UK like-for-like falls for the second half of 2008/09 and 8 per cent in 2009/10, but was pleased with improvements.

“The gross profit uplifts are impressive and importantly there seems to be a high level of supplier support for the plans,” UBS said. “A return to 3 to 4 per cent EBIT margin over the medium term has been reaffirmed, by which point the group will be highly cash generative.”

Singer, which upgraded its forecasts for department store group Debenhams a fortnight ago, welcomed the retailer’s acquisition of Principles stock. The purchase of the stock, understood to have been bought below cost, provides Debenhams with a chance “to either take some gross margin gains or, more likely, to promote tactically over the next three months, during which time the backdrop for retailers is expected to be very tough”, said the broker.

AIM-listed fashion e-tailer Asos named Nick Beighton as finance director. Beighton joins from leisure firm Luminar, where he held the same post. He succeeds Jon Kamaluddin, who now becomes Asos international director. Seymour Pierce said: “This is very positive news as the company now has an experienced person focusing solely on exploiting the significant opportunity to sell into overseas markets at little cost to the company in the early stages.”