General retailers advanced 4.7 per cent on Friday, led by Marks & Spencer, Next, Home Retail and Carphone Warehouse.
However, Pali International analyst Nick Bubb was dismissive of the uplift. He said: “It is ironic that, as the much-feared consumer slowdown has begun to unfold, the shorts in the general retailers began to lose nerve, but we don’t think that May will be a turning point in the sector’s fortunes.
“The May rally is a good selling opportunity; we think it is right to stay cautious – big downgrades to come through the rest of the results season will test investors’ new-found appetite for retailers.”
It is business as usual for the grocers, the City believes, following the Competition Commission’s inquiry. JP Morgan highlighted some of the most interesting conclusions in the Commission’s report, including the comment that “Tesco’s advantage in purchasing terms has not grown since 2003… Tesco may be approaching the point at which buying advantages in terms of scale are becoming exhausted”.
Blacks Leisure showed off its refurbished Kensington store to analysts. Shore Capital analyst John Stevenson thought the shop represented a “sea change” and was confident that Blacks is “well-placed to deliver recovery”. Separately, Blacks said it would close its Sandcity Washington office in Tyne & Wear and merge the business with its Freespirit operation in Northampton, with the loss of 50 jobs at Sandcity.
Kaupthing’s Matthew McEachran visited Ted Baker’s new City store and met management. The broker is a buyer, but believes a trading update next month “will inevitably reflect a difficult start to the year, given dire weather and an early Easter”.
Home Retail remains on Charles Stanley’s hold list following its prelims. The broker said: “The shares appear cheap and the valuation is at a discount to the sector, but this seems justified given the limited forecast visibility.”
Entertainment group HMV posts an update today. The retailer’s shares were among the week’s biggest risers, partly on hopes of a strong performance in games.
Landsbanki, advising hold ahead of the numbers, said: “The present sector premium rating reflects recovery hopes and we have been encouraged by management’s early successes but, as with Game, we remain concerned that the entertainment industry faces structural issues, as increasing amounts of products become available for digital download.”
AIM-listed home shopping retailer Ideal Shopping Direct reported that sales growth slowed to 2 per cent for the first 18 weeks of 2008. Chairman David Williams said Ideal was well-positioned to grow, but that he was cautious “in the light of a tougher economic climate”.
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