Analysts took their red pencils to the sector, as uncertainty about next year’s outlook continued to undermine sentiment.

Kaupthing advised investors not to buy general retailers in the short term and highlighted Next, Blacks and French Connection as most at risk from falling share prices. The broker remained positive on “special cases”, such as Asos, Findel and Mothercare.

JP Morgan added to the gloom with its verdict that the retail downturn is accelerating faster than expected and “slightly negative” like-for-like sales across the industry are likely in 2008.

Seymour Pierce, which is underweight on general retailers, pinpointed fashion and big-ticket retailers as high risk and downgraded Next and Debenhams to underperform and hold respectively.

Debenhams, which hit a low on Monday, ended up as one of the week’s biggest risers on the back of bid speculation (see opposite). Pali International noted that the retailer’s£1.7 billion enterprise value and trading problems would make it “a big and risky buy”.

New DSGi boss John Browett tried to cheer investors and analysts up with drinks at Claridges and a meet-and-greet at PC World’s Tottenham Court Road shop. Investec analyst David Jeary described Browett as “articulate, analytical and intelligent” and said he shows “clear recognition of the growing importance of internet retailing in electricals.” He added that Browett is inclined to “work and trade through, rather than cut and run” in response to Italian chain UniEuro’s problems. Investec retained its negative stance on the stock, however.

Despite what it described as “terrible numbers” from Sports Direct, Panmure Gordon raised its recommendation from sell to hold, on the basis of it looking likely to beat the broker’s second-half forecasts and its closeness to its target price.

At the start of the week, Sports Direct sold its Original Shoe Company chain to rival JJB for£5 million. Panmure said it was a “useful deal” for JJB, which provided “a base from which to expand into the aspirational and lifestyle end of the market, in which JD has done so well of late.”

Sell Sainsbury’s, urged Blue Oar Securities. The broker said: “The valuation remains at the top of the hill, when the recovery is only halfway up.”

Private equity firm Merchant Equity’s acquisition of French chain BUT from Kesa (Retail Week, October 26) is understood to be proceeding well. A deal may be imminent but, because of the need to consult staff, it is unlikely to be completed before the new year.

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