The lowest food inflation in three years may make life more difficult for the big grocers, whose shares have been lagging their general merchandise counterparts.

Shore Capital said food groups with overseas operations should appeal against the backdrop of “quiet” conditions at home. The broker said: “We do not yet see material risks to our earnings per share estimates for the major superstore players albeit upgrade potential in the UK has probably dissipated for now, underscoring the virtues of Tesco’s internationalisation.”

Overseas potential is also among the attractions of Debenhams, which posts interim results on Tuesday. The department store group is Barclays Capital’s top general retail pick with a 100p price target. The broker maintained: “The current share price reflects the risk coming from a weak UK consumer but overlooks potential upside from gross margin improvement and increased international exposure.”

Bookseller and stationer WHSmith was up at the start of the week, despite speculation that highly regarded boss Kate Swann is the leading candidate to succeed Adam Crozier as chief executive of Royal Mail. WHSmith, which has ridden the downturn well, reports first-half results in a fortnight’s time.

Laura Ashley’s full-year profit came in “slightly light” of house broker Numis’s expectations but was upgraded from add to buy by the broker. Numis expects “incremental progress” this year and raised its profit forecast from £12.5m to £14.4m.

Sports group JJB Sports has successfully modified its banking covenants, which should help the retailer towards recovery. JJB said its new covenant tests “are focused on current and future trading rather than information from 2009/10 and will provide greater financial flexibility than the covenant package agreed last year at the time of fundraising”.

Hold HMV advised Execution Noble following the entertainment group’s strategy update last month. The broker observed: “HMV expects to manage continued decline in traditional entertainment categories through growth in its live music business as well as new product areas such as fashion.

“Experience of the past three years since the last strategic review suggests that progress will be made, albeit not necessarily in a straight line, particularly as the benefits of capacity withdrawal and a favourable gaming cycle drop out.”

Keith Chapman, the long-standing chairman of home shopping group Findel, has stepped down as chairman and director with immediate effect. He was succeeded by David Sugden, who became a non-executive director of Findel last year.

Amid mixed noises from retailers, next week brings a sector health check with the monthly BRC sales data on Tuesday.

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