Last week’s Super Thursday round of updates brought plenty of depressing news as big names such as Dixons and Halfords warned that profits would only make the low end of expectations.
But general retailers were up over the week, when they outperformed the All Share index and their food peers. Flat Christmas like-for-likes at Tesco and worries about food volumes put the grocers out of favour. The latest food inflation data showed food prices up 1.6% month on month.
Shore Capital said: “With volumes expected to remain subdued through much of 2011, we believe the sector performance will also be subdued from a stock market perspective.” Shore rates Tesco a buy and Morrisons and Sainsbury’s hold.
Chocolates specialist Thorntons is on FinnCap’s sell list, partly on fears about the health of its high street locations. The retailer said last week that like-for-likes in its own stores fell 5.9% in the second quarter. Thorntons has been building other aspects of its business, such as commercial sales, but FinnCap cautioned: “Whether these strategic moves will offset the decline in the high street remains to be seen.”
The retailer also made clear its confidence in the fledgling Best Buy Europe big-box electricals business. Investec observed: “Five more stores are planned to open over the next few months, although it sounded very much as if ranging and merchandising is still being tested and fine-tuned.”
Broker Arden met the management of Mulberry and observed that the AIM-listed luxury goods specialist’s market cap is now almost as high as Dixons’. Luxury groups were in demand as Burberry turned in another strong performance (p12).
Also on AIM online star Asos reported retail sales up 59% in the third quarter, powered by international expansion. Add advises Numis. Peel Hunt, however, says sell because Asos is fully valued.
AIM-listed home shopping group Ideal Shopping Direct reported second-half sales growth of 8.6% or 13.9% on an adjusted basis. Talks about a potential sale are ongoing. Buy advised Oriel, which has a 189.5p price target.
Panmure Gordon stuck to its hold stance on Ted Baker, which notched up 7.6% retail sales growth at Christmas. The figure was slightly light of the broker’s expectations but Panmure said: “We like Ted Baker for its strong brand equity, international potential and cash-backed balance sheet.”
With most of the trading updates out of the way, general retail stocks were up more than 6% on a yearly basis - a better position than many might have feared.