General retailers performed strongly over the week, putting food stocks and the All-Share index in the shade.
Encouraging BRC figures helped, as did better than expected recent John Lewis numbers.
Citi has launched a quarterly Retail Demand Index to aid forecasting. The broker said that a combination of better-off consumers and softer comparatives for retailers meant there is scope for upgrades to forecasts this year.
Citi also observed that VAT and tax rises expected in 2010 are unlikely to “drive a material fall in non-food retail sales”.
Marks & Spencer was up after last week’s AGM, when executive chairman Sir Stuart Rose successfully charmed shareholders and saw off a dissident attempt to split his role early. Pali International remained cautious about Marks & Spencer’s prospects and said: “The Marks & Spencer recovery remains fragile and much will depend on how good its market share performance will be over the next 12 months.”
Pali likes Kingfisher, which reports next Thursday and is taking analysts on a tour of some of its Russian stores today. It said the group’s strong management, balance sheet and self-help potential make it a buy.
Outdoor specialist Blacks reported group like-for-likes down 1.8 per cent in the 19 weeks to July 11. Outdoor fell 1.6 per cent and boardwear 3.2 per cent. The retailer said talks about renewing its £35m banking facility were at an advanced stage and affirmed “confidence that this process will be completed rapidly to enable the group to focus on the continued delivery of the turnaround plan”.
Singer rates Blacks a “speculative” buy and said: “Although chief executive Neil Gillis has embarked on a programme to eliminate losses, additional funding will be required to do this promptly.”
Chocolatier Thorntons posted a 2.7 per cent sales decline to £27.9m in its fourth quarter, but a 6.6 per cent rise in the second half. Own-store like-for-likes slipped 1.6 per cent in the quarter but advanced 1.5 per cent in the half.
Franchise sales slumped 25.3 per cent in the quarter, hit by the administration of Birthdays, which ran 94 franchises. Weaker buying by corporate customers contributed to a 30.8 per cent fall in direct sales.
Sell Home Retail advised ING, which is concerned about the retailer’s lack of asset backing. It warned: “Home Retail has negligible asset backing and following consecutive years of negative like-for-likes within Homebase, rental costs are starting to become an issue.”
Investec reiterated its sell recommendation on Carpetright. “Difficult near-term trading outlook and lack of consistent improvements in the housing market and consumer confidence indicators have led us to cut our forecasts,” the broker said.