There was plenty to interest stock market store-watchers as general retailers staged a bounce-back over the week, Ocado generated excitement and controversy with its IPO plans and takeover talk swirled around Sainsbury’s.
KBC Peel Hunt issued a bulky note on general retailers’ prospects. The broker downgraded a raft of stocks in the light of austere economic conditions but was not entirely gloomy and concluded: “Retailers have moved on significantly since 2007 with lower gearing, tighter stock control and a more efficient overhead base. Consequently, this may prove to be a clear buying opportunity for others.”
KBC Peel Hunt key buys include Halfords, N Brown and Debenhams. Fashion group Next remains its “top pick” but was downgraded to hold because its shares are likely to “mark time” for a while.”
Online grocer Ocado set a price range of between 200p and 275p for its shares as it gears up for flotation, giving a mid-point valuation of £1.18bn. Assuming the IPO gets away, unconditional dealings in Ocado shares are likely to begin on July 26. Opinion remains divided on the merits of the etailer, which has yet to make a pre-tax profit.
Sainsbury’s was the subject of renewed speculation that Qatari investors might try to buy the grocer. Qataris have recently bought Harrods and prominent West End properties, indicating that they are keen to pull off big deals.
Marks & Spencer’s first-quarter trading impressed analysts as general merchandise like-for-likes surged 6% and market share gains were made. Collins Stewart stuck to its hold advice until more is known about new boss Marc Bolland’s strategic intentions. Singer rates M&S fair value and said forecasts are unlikely to increase because margin guidance remained unchanged.
Arden partners initiated coverage of fashion specialist SuperGroup with buy advice. The broker was impressed by SuperGroup’s “phenomenal success” in recent years and said it “should produce very strong double-digit earnings growth for a number of years”. The retailer is expected to post full-year results next week.
Oriel highlighted WHSmith and Halfords shares as “having fallen to extremely attractive entry levels” and rates both a buy. The broker said each generates cash, have defensive merits and offer material earnings growth. “The shares are discounting downgrades to consensus forecasts but we think that
this is most unlikely - it didn’t happen to estimates on either stock during the worst of the recession,” said Oriel.
Clinton Cards warned that like-for-likes will be down in the full year. House broker Numis cut its profit EBIT forecast from £19.5m to £15.7m.
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