Punchy prices being demanded by some retail IPO candidates could put off investors and derail floats, observers fear.

A queue of retailers are lining up floats, but City sources say valuation expectations are already in danger of becoming unrealistic.

Veteran retail adviser Christine Cross cautioned that some bullish retailers are now prepared to turn down valuations that they would have accepted six months ago. “Some people will fall foul because of pricing,” she said.

One retailer familiar with private companies said: “I think the floats have been completely overblown. It’s being suggested that people will get fantastic valuations but investors aren’t fools – the steam will go out of this very quickly.”

Another source baulked at valuations which he labelled “just bonkers”.

However, the City will welcome companies that it believes to be fairly valued.

McColl’s was the first IPO out of the starting blocks when it revealed its intention to float on Monday. It will issue new shares to raise £50m and reduce some of the retailer’s debt.

Retailers considering listings include Fat Face, Pets at Home and pure-play specialist Ao.com.

Poundland, which is thought to be in advanced stages of IPO planning, last week reported a record Christmas when sales surged 12.4% to £348.8m.

Altium Capital managing director and head of consumer Sam Fuller believed that the market would be willing to pay a premium for fast-growing etailers such as Ao.com as investors vie to find “the next Asos”.

“The stock market will find disruptive online retailers top of their list of attractive consumer opportunities,” he said.