Goldman Sachs has forecast that retail like-for-likes will rise in 2010 after two years of declines in the store groups it follows.
The broker expects comparable store sales to advance 0.6% this year as consumers’ disposable income remains high, but conceded that the trading environment will remain tough for many.
“We believe that current share prices imply a 20% reduction in operating profits in 2010,” said Goldman analysts. “This would require an average sales reduction of 6%.” The broker believes that is too cautious a view and “current share prices offer selective valuation opportunities”.
Goldman Sachs said it prefers retailers with self-help opportunities, such as those with the opportunity to improve margins and returns. The broker reiterated its buy advice on Debenhams, HMV and Signet and added Marks & Spencer to its “conviction buy” list.
Retailers with low margins and returns should be avoided despite some having shown high profit growth, the broker said. It reiterated its sell stance on Carpetright, DSGi, Home Retail and Kesa.
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