Despite retail’s brutal derating, Citi argued it is still too early to buy and said: “Macro-data suggests 2008 will be worse than 2005, with non-food retail sales flat or worse for all of 2008.”
The broker said it favours store groups “with absolute value characteristics and true global growth dynamics” and remains a buyer of Marks & Spencer and Next. However, Citi warned: “In the absence of clear conviction on a specific stock, investors’ default position should be one of caution.”
ING initiated coverage of food groups with buy advice on Tesco and a hold stance on Sainsbury’s. The broker likes Tesco’s international exposure, but fears that Sainsbury’s “new sales targets will present a genuine challenge in what may prove to be a difficult market in 2008”.
Marks & Spencer raised eyebrows by distributing money-off vouchers to staff and pensioners. Pali International noted that the cost of voucher promotions “is never huge”, but said: “This will revive concerns that M&S’s trading has remained disappointing since Christmas.”
Sainsbury’s ticked up on renewed speculation that the Qatar Investment Authority intends to up its stake in the grocer to 29 per cent. Debenhams may also be the focus of Middle Eastern bid interest. Dubai retail tycoon Micky Jagtiani’s investment vehicle Milestone Resources, which has been stakebuilding in the department store group, said “nothing has been ruled out” regarding Debenhams.
Troubled sofas specialist ScS’s shares climbed as investor Stancroft Trust built up a 5 per cent stake in the retailer.
DIY giant Kingfisher posts fourth-quarter numbers next week. Panmure Gordon reiterated its hold guidance and said that, despite the appointment of Ian Cheshire as chief executive, it is too early to turn positive on the stock, because of a “relatively high valuation and difficult trading ahead”.
Home shopping group Findel fell over the week, despite hosting an analysts’ visit that impressed those attending. Kaupthing said: “This has been one of the more interesting retail stories in the past 12 months, with its positive momentum still building. Current weakness represents a good buying opportunity.”
Buy fashion e-tailer Asos, urged Landsbanki. The broker said: “Asos remains well placed to benefit from the shift in spending to the internet, away from traditional bricks-and-mortar retailers.”