Early Sales and consumer belt tightening hit retail share prices

As Debenhams launched a “three-day spectacular”, Retail-week.com revealed that Marks & Spencer would also stage a high-profile event. M&S held a 20 per cent-off Sale on Thursday – its biggest pre-Christmas promotion since 2004.

Singer Capital Markets observed: “The level of discounting indicates just how difficult trading conditions have got and how the big players are fighting to capture what spend customers are willing to make.”

But the broker also noted: “The big retailers are clearly taking no chances and aim to have as clean a stock profile for the end of January as possible in order to move into full-price mode ahead of the general pack.”

That case was made by Debenhams chief executive Rob Templeman, as he showed off the new season’s ranges. He is determined to be among the earliest to move back to prime trading and believes the retailer’s fashions will offer the newness essential to win spend.

Singer said: “The range preview indicated a continued push into design and fashion, with all categories showing evidence of more detail and forward-fashion designs. Given their current experience, this shift should provide some continuing offset to weak demand dynamics at the peak of the downturn next year.”

Variety store group Woolworths confirmed that it has entered negotiations with a potential buyer after press reports that restructuring specialist Hilco was in talks about buying Woolworths for£1. Dresdner Kleinwort said: “Short term, if the business is run for cash this could adversely impact the likes of Game, WHSmith and HMV. Longer term, with some capacity exiting the market, it could benefit these three.”

Investec pierced the gloomy atmosphere with a sunny(ish) note entitled We’re not selling any more. The broker has swapped its long-standing underweight sector stance to neutral and said: “The sector has already discounted significant downside and we therefore believe a neutral stance is now more appropriate, while still too early for a more positive call.” Investec’s preferred picks are Next, for earnings resilience and prudent management style, and N Brown for continued sales growth and operating efficiencies.

Tesco fell out of favour with JP Morgan, which downgraded the grocer from neutral to underweight. The broker warned: “We think that Aldi threatens to overturn many axioms of best practice in UK grocery retailing to which Tesco is so firmly wedded.”