Industry bellwether Marks & Spencer posted a 34 per cent fall in pre-tax interim profits to£298 million. Total sales were up 0.8 per cent, but UK like-for-likes were down 5.7 per cent. Although the figures were better than some in the City had feared, executive chairman Sir Stuart Rose revealed plans to slash capital expenditure and marketing spend in order to shore up the company’s position.
Hold, said Panmure Gordon, arguing that “M&S has enormous brand value and that is worth more than the current share price”. However, Pali International rated the shares a sell, warning: “Unless the consumer rushes into the stores at Christmas because of the new TV ads with Take That, we see more disappointment on top-line sales.”
Next also reported tough trading, but appeared to be making a better fist of it than M&S, with total sales across stores and Directory up 0.9 per cent and like-for-likes down 4.4 per cent in the 14 weeks to November 1. “These numbers are better than expected and highlight the underperformances of M&S,” said Seymour Pierce, advising hold.
Associated British Foods-owned fashion retailer Primark also continued to power along, with full-year profits up 17 per cent to£233 million and like-for-likes up 4 per cent for the year.
The grocers had a less fruitful week and ING downgraded Tesco from buy to hold. The broker fears that the weakening non-food market, tougher times in some of its international markets and intense competition in UK grocery will hamper its performance.
Shares in Game and HMV both rallied amid rumours of a possible tie-up between the businesses. However, sources close to both retailers played down the talk and broker Singer said it would be likely to fall foul of the competition watchdogs.
Sell Ted Baker, said Seymour Pierce. The quirky fashion retailer has consistently outperformed but was downgraded by the broker over concerns about the impact of the downturn on its trendy urban customers.
Home shopping specialist Ideal Shopping Direct warned it was likely to make a loss this year, with current sales down 10 per cent and£600,000 on deposit with Kaupthing unlikely to be recovered.
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