Store stocks were on the up over the week as food and general merchandisers rose with the market, although the former still lagged the All Share index while the latter outperformed.
Entertainment group Game was the biggest riser following Retail Week’s story that a sale of international operations is on the cards as the retailer refocuses.
Singer stuck with its sell advice on Game because of ongoing risk. The broker said: “With revised terms agreed for its facilities and the threat of a covenant breach now off the agenda, Game has some breathing space, but the market may have underestimated just how dire the situation had got.”
Mothercare surprised with the appointment of Lovefilm boss Simon Calver as chief executive. Independent analyst Nick Bubb said: “We can see that his ecommerce and branding experience will come in useful in exploiting the Mothercare and Early Learning brands worldwide. Quite what he can add to the process of grinding the struggling UK business back to profit is unclear.”
Supergroup’s third-quarter update led to some downgrades as management cut profit guidance to the lower end of expectations. Peel Hunt was surprised by the timing of the downgrade because January is not one of the retailer’s key trading periods, but retained its hold advice.
Hold Dunelm advised Seymour Pierce following the value homewares group’s interim results. The broker cautioned: “The homewares market is unlikely to get help from the economy over the next year while the success of the brand is very much on other retailers’ radar screens so, we believe, competition is intensifying – both Next and Marks & Spencer are developing their home ranges in-store and on the internet.”
Buy Asos recommended Collins Stewart, which believes that there are “numerous positive catalysts” in play at the fashion etailer.
Collins Stewart noted: “Investment in country-specific websites, in particular the US and Australia combined with strong operational benefits from the centralised distribution centre in Barnsley should continue to support improving stock turn and working capital management.”
Panmure cut its profit expectations from Halfords but increased its share price target and shifted stance from hold to buy. The broker reasoned that the retailer will continue to generate enough free cash flow to pay its dividend and said: “We see some similarities with WHSmith in that we see long-term opportunities to manage the margin mix through space reallocation and reduction, while costs can be reduced.”
Next week brings updates from Sports Direct and Thorntons.
No comments yet