Grocers, led by Tesco, bucked a gloomy market, but it was a poor week for general retailers as investors continued to wring their hands about general prospects, not helped when fashion group Alexon warned on profits.
Chocolatier Thorntons posted full-year results at the top of expectations, noted house broker Investec. Investec, which rates the retailer a hold, said much now depends on implementation of the strategic review and concluded: “While we have not upgraded our forecasts, it is encouraging that we have not downgraded at what should now be the trough for group profit.”
Life remains tough for electricals market leader Dixons, which reported a 10% like-for-like sales fall at its core UK and Ireland division. The decline was as expected and Panmure Gordon remained a buyer of the stock, despite concerns about a looming bond repayment.
The broker said: “The risk profile remains high, but we think it can repay its bonds next year, helped by planned lower capital expenditure and cost savings.” Seymour Pierce, which rates Dixons hold, said: “The management is battling against a market with continued weak demand and sales.”
Buy Sports Direct recommended Singer after the retailer’s update on Wednesday. Singer said: “Against its toughest comparatives since coming to market in 2007, Sports Direct has managed to grow its sales, albeit gross margin fully unwound versus the World Cup peak last year.”
Ahead of Kingfisher’s interims next week, the DIY group was on brokers’ buy lists. Shore Capital observed: “Notwithstanding the weaker outlook for the consumer in many markets, we believe that Kingfisher is pulling ahead of other retailers in this space through a focus on innovation and sourcing initiatives that deliver value for the consumer.”
Jefferies expects the interims to be “a timely reminder of the group’s resilience in a tough context” and thinks Kingfisher’s French division will offset weakness in the UK. The retailer’s focus on direct sourcing is likely to support margins.
Online fashion star Asos is showing off its new warehouse to analysts next week. Investec has changed is recommendation from sell to hold and explained: “The recent weakness in Asos’s share price has made it less prone to altitude sickness.”
City highlights next week include an update from Kesa and Next’s interims.