Grocers lagged the market as lower food price inflation contributed to lacklustre first-quarter like-for-like growth at Sainsbury’s and Tesco - 1.1% in each case before the VAT change is taken into account.
Brokers had expected the slowdown and there was little impact on forecasts. Shore Capital reiterated its buy advice on Tesco and said: “Despite the subdued UK trading, management talked of profits growing ahead of sales - in other words indicating a strengthening margin in the group’s core market, with the benefits of the ongoing change programme coming to the fore.”
Ambrian was underwhelmed by Sainsbury’s, which it rates a hold, and said: “We are not going to obsess about one quarter’s sales growth, especially in an industry where all the main operators’ performances have converged to within a fag paper of each other. The issue facing Sainsbury’s is that it is doing nothing that is game-changing.”
Home shopping group N Brown pleased analysts with its surprise £11.5m purchase of Figleaves. Panmure Gordon, advising buy, said the deal gives N Brown access to a younger, wealthier customer, extends its international reach and should be earnings accretive in 2012. KBC Peel Hunt, also recommending buy, said: “The acquisition will cement N Brown’s position as the leading online retailer of lingerie.”
Etail star Asos, which posted full-year figures last week, is rated an add by Arden partners. The broker said Asos is on a “racy” rating but believes there will likely be upgrades later this year and has set an 800p price target.
Idiosyncratic fashion specialist Ted Baker’s trading update impressed, showing 20.4% retail sales growth over 19 weeks. Singer upgraded its forecasts and maintained: “Global brand distribution is being enhanced by Ted Baker management, which has taken over from weak former partners. This raises the long overdue prospect of successful international growth and a re-rating.”
Oriel was pleased by home shopping firm Ideal Shopping Direct’s AGM update, showing accelerating like-for-like growth. The broker said: “The recent reinstatement of supplier credit insurance, a new flexi-pay policy, the recent relaunch of the website and additional Freeview capacity are clearly benefiting the company.”
SuperGroup, the newly floated owner of ultra-trendy brand Superdry, will open stores in the United Arab Emirates through a franchise agreement with Dubai-based Al Khayyat Investments. There are plans for 13 Superdry stores in the country over the next three years.
Next week could be volatile for retailers, depending upon the contents of Tuesday’s emergency Budget. The corporate highlights will be full-year results from the two leading electricals groups, DSGi and Kesa.