Food and general retailers alike were down with the market as the effects of financial turmoil in China were felt in markets globally.
The fall among general retailers was however less than that of the All-Share Index.
Even luxury group Burberry, for which China is a crucial market, limited its decline to 5.7% over the week and did not feature among the five biggest retail share price fallers. Burberry has however lost a fifth of its value over the last three months.
Barclays spooked investors in retailers with a bearish general retail sector note entitled ‘Winter is Coming’.
The broker believes that the longer-term impact of wage inflation, prompted by the recent Budget, will create “unplanned cost pressures” and that consumer demand “contrary to common market belief will likely be hurt as welfare cuts more than offset increased wage income”.
Barclays has cut its earnings per share forecasts for the general retail sector by 11% this year and 20% next and was especially downbeat about Argos-owner Home Retail.
The broker said: “Domestically focused companies with high labour/sales ratios, low EBIT margins, high operational gearing and highly price-elastic products will be impacted the most. We believe Home has all those characteristics to a great extent.”
Bookseller and stationer WHSmith’s pre-close update pleased Besi, which is a market maker in the retailer’s shares.
The broker noted that the recent row over VAT at airports seems to have had a “minimal” effect on WHSmith but said: “While this may be a case of early days, sales and passenger mix both suggest that the issue is less impactful in real life than in the press.
“We expect it to continue to feature in valuation debate for the time being however, limiting upside potential on rating grounds for the shares.
Poundland’s acquisition of rival 99p Stores was provisionally cleared by the Competition and Markets Authority, removing the cloud of uncertainty that had hung over the deal.
Canaccord Genuity put its hold stance under review on the news and said: “We would expect the shares to react very positively, having previously passed through 400p when the acquisition was initially announced.”
The latest Kantar food market share data brought little relief for the big four grocers – only Sainsbury’s managed to add sales in the 12 weeks covered.
Broker Stifel said: “Overall, the picture is not good for the big four, with the relative recovery seen in the first half of the year now firmly in retreat and underperformance of overall industry growth now back close to peak levels. We remain cautious on the sector.”
Although down over the week, home shopping group N Brown enjoyed a share price spike on Monday despite the wider market turmoil.
N+1 Singer upgraded the retailer from hold to buy.
The broker said: “We continue to anticipate an uptick in sales and profitability and believe recent weakness provides a timely buying opportunity.”
There is little scheduled City news for the rest of this week but Gfk consumer confidence data will be released on Friday.
All-Share Index 25/8/2015
|Marks & Spencer||8,104.00||502||-31||-5.82||16.92|
|JD Sports Fashion||1,567.90||845.5||-29.5||-3.37||24.04|
|Pets at Home||1,370.00||281.1||6.2||2.26||19.49|