Retail shares rebound after last week’s blow

Arden Partners analyst Nick Bubb said that stock markets are almost as volatile as the weather at present. He maintained: “We still think that lowly valuations in the out-of-favour general retail sector look attractive.

“We are not tempted to pound the table on the cyclical/higher-risk stocks, but we still like Next and Kingfisher, as well as some of the more defensive plays like Halfords and Mothercare.

“As for the food retail sector, our patience with Morrisons is being tested after a disappointing market share outcome in the latest

Nielsen grocery data, but this is the wrong time to give up on them and it remains cheap on an operating company/property company valuation basis.”

Next is also on Shore Capital’s buy list. Simon Wolfson, the retailer’s chief executive, and finance director David Keens have both been buying shares in recent weeks - Wolfson in late May and Keens as recently as Tuesday.

Shore Capital analyst Kate Calvert said: “We believe continued evidence that the Next brand has turned the corner and improving returns, together with the re-commencement of its share buyback programme, should drive a re-rating of the shares.”

Hold Topps Tiles, recommended Investec following interim results. As expected, pre-tax profits were down, as were like-for-likes. Analyst David Jeary noted: “Topps is not without merits - it is the leading specialist tile retailer, it remains cash generative and therefore remains of potential interest to both retail and builders’ merchant companies.”

Investec is reviewing its target price for Topps “in order to reflect shorter-term trading prospects, where ongoing demand volatility highlights the downside rather than upside risks of operational gearing.”

Panmure Gordon rated Asos a buy ahead of next week’s full-year results. The broker increased its target price from 635p to 735p and analyst Jean Roche said: “Catalysts to achieving our target include strong current trading and possible continued stakebuilding by Danish supplier to Asos, Bestseller.”

Accumulate Burberry, advised broker Charles Stanley. The luxury retailer issued impressive full-year results last week and analyst Sam Hart said: “The iconic Burberry brand leaves the group very well placed to benefit from long-term structural growth in the global luxury goods market.”

The BRC will issue sales data for May on Tuesday, providing a temperature check on the retail market overall.