The best October sales growth in almost a decade and more upbeat pronouncements from store chiefs helped catapult general retail stocks into orbit versus their All-Share and food counterparts.

In the wake of optimistic noises from Marks & Spencer executive chairman Sir Stuart Rose and Next chief executive Simon Wolfson last week, the benchmark British Retail Consortium survey showed last month’s retail like-for-likes climbed 3.8% - the best October numbers since 2002.

Despite some worries about the profitability of those sales, investors were pleased. Citi said the survey reinforced its view that there is “upside risk” to the second-half consensus of a comparable store sales fall of between 2% and 3%.

Investec observed: “Although the BRC cited a pick-up in optimism ahead of Christmas, it is important to contextualise growth momentum. We expect to see soft year-on-year comparables for the whole of the fourth quarter. Moreover, retailers have already launched an array of promotions to start driving footfall in the pre-festive season.”

UBS retained its neutral stance on M&S following the interims. Charles Stanley has an accumulate recommendation and said: “Credible strategies are now in place for general merchandise, online and international. Given the sound balance sheet, freehold property backing and anticipated consensus forecast upgrades we regard the valuation as undemanding.”

Buy Next, advised Singer after the retailer’s third-quarter statement. “This was an excellent update and, on top of the upgrades, we continue to argue for a re-rating,” said the broker.

The latest TNS grocery market data prompted divergent views from analysts. Bernstein said Tesco had outperformed and expected “further improvement in near-term trading”. But Jefferies argued: “Despite suggestions to the contrary, Tesco still lags peers. With cash sales growth of 5.1%, Tesco continues to lag the other majors.”

Sainsbury’s first-half profits were 2% ahead of consensus, Bernstein said. The broker rates the grocer market-perform and has a 360p price target. It said: “Property continues to offer support to valuation with property net of debt representing approximately 360p per share.”

Etail fashion star Asos issues interims on Monday, when KBC Peel Hunt expects to hear of “relatively modest” profit growth. The broker has a 400p price target for the AIM-listed business.
It said: “Asos remains one of the few genuine retail growth stories in the UK. With the interim results just two to three weeks before peak trading, we would not expect to see material forecast upgrades.”

KBC Peel Hunt expects Asos will be well placed to outperform again in 2011.

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